- The US dollar has fallen a bit during the trading session on Tuesday as the 50-Day EMA has offered a bit of resistance, but it’s also worth noting that it was Independence Day in the United States, meaning that there was a serious lack of liquidity.
- All things being equal, I am also paying close attention to the 1.33 level above, which was previous support.
- It should now have a certain amount of “market memory” attached to it, so I think given enough time we could go much lower, perhaps reaching toward the 1.31 level.
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USD/CAD Technical Outlook
If we were to break down below the 1.31 level, then it’s possible that we could see the market dropping down to the psychologically important 1.30 level. That being said, you should also pay close attention to the fact that the market had broken out of some type of rectangle, between the 1.33 level in the 1.38 level. In other words, the “measure move” should be 500 pips, meaning that we could drop down to the 1.28 level before it is all said and done.
Short-term rally should be thought of as opportunities to start shorting the USD/CAD currency pair again, unless of course we break above the 200-Day EMA, which is closer to the 1.3375 level. All things being equal, if we were to break above there, the market is likely to go looking to the 1.3650 CAD level.
Keep in mind that the Canadian dollar is highly sensitive to the crude oil market, and it’s probably worth noting that oil has been trying to sort itself out lately. We have seen a certain amount of strength in the crude oil market, so that of course helps the Canadian dollar itself. It’ll be interesting to see how this plays out, but all things being equal, the technical analysis does suggest that we are going to continue drifting lower. That doesn’t necessarily mean that we break apart and start falling drastically, just that the momentum is most certainly with the Canadian dollar over the last several weeks.
Potential USD/CAD Signal
- On a break below the 1.32 level, I do believe that the market is likely to continue drifting lower, perhaps reaching down to the 1.31 level initially.
- Any move below there has the possibility of reaching down to the 1.30 level rather quickly.
- I would have a stop loss just above the 1.33 level.
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