Key USD/CAD Levels to Watch

CAD Analysis and Talking Points

  • Canadian Dollar Remains Weak Amid Falling Oil Prices
  • USD/CAD Capped by Key Resistance
  • Canadian Dollar at Risk from Bulls Bailing

USD/CAD | Canadian Dollar Remains Soft

As risk sentiment remains dented by the continuing concerns surrounding the coronavirus outbreak, high beta currencies such as the Canadian Dollar, remains on the backfoot. Alongside this, the sizeable decline observed in energy markets, in particular, crude oil prices (Brent down 18% since Jan 7th peak), has been a drag on the commodity linked currency. That said, amid the recent dovish pivot from the Bank of Canada following soft domestic data, CAD is likely to become more volatile in response to incoming economic data. With that in mind, given the speculative long positioning in the Canadian Dollar, risks are asymmetrically tilted to the downside.

Canadian Dollar at Risk from Long Liquidation

Source: CFTC, DailyFX

On the technical front however, the 200DMA has capped the recent upside in USD/CAD at 1.3226 and thus failure to break could pave the way for a pullback in the pair. Momentum indicators continue to signal further upside in the pair and thus we see risk of a break above the 200DMA in the absence of a stabilisation in oil prices and risk sentiment, which in turn opens the door towards 1.3250 with 1.3300 the key upside target.

Support

Resistance

1.3200

1.3218

61.8% Fib

1.3176

100DMA

1.3226

200DMA

1.3167

50% Fib

1.3250

USD/CAD Price Chart: Daily Time Frame

Canadian Dollar Forecast

Source: IG Charts

— Written by Justin McQueen, Market Analyst

Follow Justin on Twitter @JMcQueenFX

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