Canadian Dollar Technical Forecast: USD/CAD Bounce or Break?

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Loonie (CAD) Weekly Technical Forecast: Bullish, Upon Trendline Bounce

Since bottoming out in June of 2021, USD/CAD has made a quite uneven try at forging a longer-term uptrend. For probably the most half, the pair has printed increased highs and better lows however the latest US greenback sell-off brings USD/CAD perilously near the decrease sure of the ascending channel and marks two consecutive weeks of sizable declines.

USD/CAD Weekly Chart

Source: IG, ready by Richard Snow

The day by day chart helps view latest value motion in a extra granular kind. Firstly, the development following, momentum indicator, the MACD, reveals the MACD line persevering with under the sign line with each traces showing under the ‘0’ line – suggesting bearish development continuation. The Relative Strength Indicator (RSI) approaches however has not but dipped into overbought territory suggesting that there could also be some additional promoting forward. A break under the trendline leaves loads of room for USD/CAD to drop, as the subsequent important zone of assist lies between 1.2275 and 1.2310 earlier than 1.2220.

While costs might proceed decrease we’re beginning to see what appears like a slow-down within the USD sell-off which could be seen on the USD/CAD chart under as yesterday’s closing candle printed a average decrease wick – signaling a rejection of decrease costs. At the time of writing, Friday’s day by day candle additionally reveals a average decrease wick whereas buying and selling near flat on the day. Considering this alongside the proximity to trendline assist, goes someway to supporting a possible reversal play as soon as confirmed. Areas to look at for better conviction within the reversal narrative are available at 1.206 and the 23.6% Fibonacci degree (drawn from the March 2020 excessive to the 2021 low) at 1.2635.

Brush up on easy methods to learn candlestick charts by way of our full information.

USD/CAD Daily Chart

USDCAD Daily Chart

Source: IG, ready by Richard Snow

Major Risk Events for the Week Ahead

The financial calendar appears quite gentle for the US and Canada over the upcoming week. The main information factors are headline and core CPI (inflation) information within the lead as much as the Bank of Canada’s first assembly of the 12 months on January the twenty second the place it’s largely anticipated that we’ll see a charge hike from 0.25% to 0.5%.

DailyFX Economic Calendar

DailyFX Economic Calendar

Customize and filter dwell financial information by way of our DaliyFX financial calendar

Rates markets at the moment value in round 78% probability of a hike.

Implied Probability of a Rate Hike on Jan twenty sixth

Implied Probability of a Rate Hike 2022

Source: Refinitiv, by way of CADOIS

— Written by Richard Snow for DailyFX.com Contact and observe Richard on Twitter: @RichardSnowFX

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