Canadian Greenback Forecast: USD/CAD Surge Pulls Again

Canadian Greenback Technical Value Outlook: USD/CAD Weekly Commerce Ranges

• USD/CAD put in a large reversal final week on the again of the FOMC.
• Does the reversal have endurance? Brief-term bullish momentum retains the door open for higher-highs.
• The evaluation contained in article depends on worth motion and chart formations. To be taught extra about worth motion or chart patterns, take a look at our DailyFX Training part.

Final week was large for USD/CAD, as a serious push larger by bulls broke by way of numerous resistance ranges.

It was earlier in June when sellers remained in-control of USD/CAD, angling for an additional take a look at of the 1.2000 psychological degree. However, as I had warned just a few days prior, bears had been already wanting beleaguered, and a pullback began to appear extra possible. On June 2nd, bears took their swing however ended up falling quick, making a swing low on the 1.2002 spot. And as I mentioned within the webinar final week, this was a primary instance of a psychological degree exerting affect in the marketplace with out having truly come into play.

To be taught extra about psychological ranges, take a look at DailyFX Training

By means of the following couple weeks in June, forward of the FOMC fee resolution, costs continued to work-higher. Alongside the best way a less-hawkish Financial institution of Canada helped to carry a little bit of CAD weak point into the equation.

However it was the FOMC fee resolution that made a severe dent. The Fed highlighted the potential for 2 fee hikes in 2023 and the US Greenback began to fly in opposition to many currencies, CAD included. Friday noticed some thickening of the drama as St. Louis Fed President, James Bullard, warned that he is perhaps prepared to boost charges in 2022, even quicker than the Fed had warned of simply a few days prior. In response, the US Greenback drove even-higher and USD/CAD made a quick run in the direction of the 1.2500 psychological degree.

USD/CAD 4-Hour Value Chart

Chart ready by James Stanley; USDCAD on Tradingview

USD/CAD: Fade or Comply with?

Taking a step again to have a look at longer-term dynamics and USD/CAD has been most likely one of many cleaner short-side USD traits. There’s a trendline connecting from final March’s excessive to this April’s excessive and this was lastly taken-out on that Friday transfer. This additionally highlights how built-in that bearish development had change into over the previous 12 months, hastening in April with the BoC took a comparatively hawkish stance at their assembly which is what drove USD/CAD in the direction of the 1.2000 deal with.

USD/CAD Day by day Value Chart

Chart ready by James Stanley; USDCAD on Tradingview

However, now that the trendline is damaged, can bulls have extra room to run? Effectively that is doubtless going to depend upon simply how hawkish the Fed sounds within the aftermath of final week’s fee resolution, and there’s a plethora of Fed converse coming to the headlines this week to talk to that subject.

Additionally of curiosity, there’s a PCE launch on Friday, and that is the Fed’s most well-liked inflation gauge. Judging by Treasury charges, markets are a bit extra snug with the ‘inflation as a transitory theme’ thesis; the larger query is simply how snug the remainder of the FOMC is it and we’ll hear lots about that this week.

USD/CAD Brief-Time period

At this level, short-term methods will doubtless be specializing in the surge in final week’s bullish momentum. At this level, worth motion is testing the 23.6% Fibonacci retracement of the June bounce, and this traces up with an space of prior swing help/resistance across the 1.2350-60 space. This could possibly be checked out as an space of key help for short-term bullish development methods. A secondary help zone could possibly be sought out across the 1.2250-1.2300 zone.

To be taught extra about Fibonacci, take a look at DailyFX Training

USD/CAD 4-Hour Value Chart

Chart ready by James Stanley; USDCAD on Tradingview

USD/CAD Longer-Time period

On a much bigger image foundation, final week’s bounce is attention-grabbing within the context of longer-term bearish continuation potential. Value motion made a quick method in the direction of an enormous zone however didn’t fairly take a look at the world beginning across the 1.2500 deal with. This might require some persistence as is usually the case with a longer-term method, searching for the short-term bullish momentum to proceed larger till this large zone of resistance can come into play.

Exterior of that, if this zone doesn’t get examined, sellers can search for a transfer back-below the 1.2250 degree to point a return of bearish momentum. That will come together with a nullification of the short-term bullish construction that may put bears again within the driver’s seat for near-term traits.

— Written by James Stanley, Senior Strategist for DailyFX.com

Contact and comply with James on Twitter: @JStanleyFX