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Mixed Technical Signals Could Halt Upside Rally

USD/CAD PRICE, CHARTS AND ANALYSIS:

  • Hawkish BoC Fails to Inspire CAD Bulls.
  • A Rebound in Oil Today has Failed to Spark USDCAD into life, Will Fedspeak do the Trick?
  • Taking a look at the IG client Sentiment Data and we can see that Retail Traders are Currently Net-SHORT with 72% of Traders Holding Short Positions.
  • To Learn More About Price Action,Chart PatternsandMoving Averages, Check out theDailyFX Education Series.

USDCAD has continued to rally after finding support around the 1.3650 mark on Monday. Since then, it has rallied close to 200 pips as the US Dollar Index inched higher as well and Oil prices continued to slide.

BANK OF CANADA

The Bank of Canada Deputy Governor Carolyn Rodgers has been vocal this week following the release of the summary of deliberations. The Deputy Governor warned that the period of super-low interest rates is likely over and that both businesses and consumers need to adapt. Rodgers stated that people are already feeling a strain of existing debt as delinquency rates on credit cards, car loans and unsecured lines of credit have returned to or have slightly surpassed their pre-pandemic levels.

The Summary of Deliberations showed that some members felt that it was more likely than not that the policy rate would need to increase further to return inflation to target. Interestingly enough this was a similar message which we heard from Jerome Powell yesterday in his address at the IMF which sparked a bit of life into the US Dollar. Judging by the position of Central Banks now might be a good time to focus a bit more on the technical.

US Dollar Index (DXY) Daily Chart

Source: TradingView

TECHNICAL ANALYSIS USD/CAD

USDCAD failed at the 1.3900 resistance level two weeks ago before a selloff of some 270 pips before finding support at the 1.3650 support area. This area also had the 50-day MA which provided an extra confluence and has seen USDCAD rise to trade just above the 1.3800 handle at the time of writing.

USDCAD is however flashing mixed signals with the daily candle close on Friday November 3 breaking the overall bullish structure as it closed below the previous higher low swing point around 1.3660. his would hint at a new lower high, shy of the previous high at 1.3900 before pushing to print a new lower low and break through support at the 1.3650 handle. In contrast to his development, we also have just seen a golden cross pattern develop as the 100-day MA crosses above the 200-day MA in a sign that the bullish momentum may yet continue. These are two completely different signals when it comes to the next mood for USDCAD and kind of reflects the reason indecisive nature of markets as a whole.

I for one still prefer a bit of a correction to the downside with a potential retest of the 100 and 200-day MAs before a push to potentially break the 1.3900 handle. This of course is just a gut feeling but i will no doubt be monitoring the pair with interest in the coming days.

Key Levels to Keep an Eye On:

Support levels:

  • 1.3758
  • 1.3650
  • 1.3500

Resistance levels:

  • 1.3900
  • 1.4000
  • 1.4130

USD/CAD Daily Chart

Source: TradingView, prepared by Zain Vawda

IG CLIENT SENTIMENT

Taking a look at the IG client sentiment data and we can see that retail traders are currently net SHORT with 72% of Traders holding short positions. Given the contrarian view adopted here at DailyFX toward client sentiment, Is USDCAD Destined to rise further and break the 1.3900 resistance level?

— Written by Zain Vawda for DailyFX.com

Contact and follow Zain on Twitter: @zvawda

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