USD/CAD eyes a breakout as support and resistance converge
USD/CAD has fallen over 12 big figures from the mid-March high and now nears a crucial breakout zone as technical indicators collide.
USD/CAD technical outlook and price chart
- Ongoing US dollar weakness supports bearish USD/CAD price action
- IG client sentiment (IGCS) positioning adds weight to further USD/CAD downside
USD/CAD pressing against trend resistance once again
The Canadian dollar’s appreciation against the US dollar has come to a halt and is now testing both trend resistance and horizontal support based off multi-month lows.
The downtrend has held firm in recent days, apart from a false breakout in mid-July, and price action over the next few days will decide the pair’s medium-term outlook. The chart shows a bearish ‘death cross’ was made on 22 July, when the 50-day simple moving average (SMA) - the green line on the chart - fell through the 200-day SMA (the black line on the chart).
Support for the pair is seen around $1.3314, the 10 June low, and the top of the old trading range that held sway until the late-February break higher. With the downtrend set to cut across this support level shortly, a breakout is expected to happen as the apex of the two lines nears.
IGCS retail trader data shows 66.30% of traders are net long, with the ratio of traders long to short at 1.97 to one. The number of traders net long is 1.37% higher than yesterday and 17.91% higher from last week, while the number of traders net short is 9.63% lower than yesterday and 28.84% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net long suggests USD/CAD prices may continue to fall. Traders are further net long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger USD/CAD bearish contrarian trading bias.
This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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