USD/CAD Recovers, Will it Reverse Decrease Quickly?

USD/CAD Value Forecast:

• USD/CAD moved off current lows, pushing past 1.2800 for the primary time in two weeks
• Progress above the extent was brief lived and USD/CAD has since pulled again and nears assist
• Whereas current positive factors may encourage USD bulls, the technical outlook reveals the trail of least resistance stays decrease

Canadian Greenback Forecast: USD/CAD Recovers, Will it Reverse Decrease Quickly?

USD/CAD began the week off sturdy because it pushed above 1.2800 for the primary time since late December. The broader Greenback Basket (DXY) additionally confirmed indicators of life because it pulled away from current lows and retook the 90 mark. Bullish progress has already encountered resistance, nevertheless, and additional positive factors might change into tougher to ascertain because of this.

Canadian Greenback (USD/CAD) Value Chart: Each day Time Body (July 2018 – January 2021)

Little has modified within the basic panorama and what has may very well work to erode USD/CAD additional. First, President elect Joe Biden introduced additional stimulus within the type of a number of trillions. Such a transfer would work to undermine the Buck and threaten any tried restoration rallies.

However, crude oil costs have continued to rise with the commodity reaching an 11-month excessive as of Tuesday’s session. As an necessary issue of the Canadian financial system and Canadian Greenback, continued power in crude oil may fit to buoy the Loonie. Whereas modest crude power is unlikely to singlehandedly drive USD/CAD decrease as soon as extra, it might work along with subsequent stimulus, each of which can see a renewed decline within the pair.

USD/CAD Value Chart: 4 – Hour Time Body (July 2020 – January 2021)

Early areas of resistance within the occasion of a renewed restoration try seemingly reside simply south of 1.2800 adopted by the descending trendline drawn off the September and November lows. Tertiary resistance may relaxation larger nonetheless, because the psychologically-significant 1.3000 mark looms overhead. In need of breaking by means of every of those areas, USD/CAD rallies could also be thought of short-term recoveries and consolidation amidst a broader downturn that has proven few indicators of exhaustion.

Additional nonetheless, IG shopper sentiment knowledge reveals retail purchasers stay net-long USD/CAD. Since we sometimes take a contrarian view to crowd positioning, the info might counsel additional declines on the horizon for USD/CAD. Within the meantime, comply with @PeterHanksFX on Twitter for updates and evaluation.

–Written by Peter Hanks, Strategist for DailyFX.com

Contact and comply with Peter on Twitter @PeterHanksFX