USD/CAD Technical Outlook
- USD/CAD bounce off the 200-day has wedge break in play
- Higher ranges may very well be assist by a stock market pullback
USD/CAD Technical Outlook: Higher Levels Appear Likely in Near-term
USD/CAD tagged the 200-day transferring common final week, and is now attempting to stand up out of a bullish-looking descending wedge. The preliminary flip off the 200-day has been a powerful one, so momentum is already off to a superb begin.
The descending wedge isn’t essentially the most strong variation, however nonetheless it’s there. And, once more, with worth coming arduous off the 200 the ability of the sample strengthens. Running over the latest excessive might be key to strengthening a bullish outlook as worth nonetheless stays pointed decrease because the July excessive.
A breakout above 12985 is required to get USD/CAD into open house again in direction of the July excessive of 13223. This would possibly appear to be a good distance away to fret about, however USD/CAD is understood for shortly garnering momentum as soon as it will get going.
What is seen as a possible boon for larger ranges is the truth that main U.S. indices, particularly the S&P 500, are turning decrease off the 200-day transferring common and trend-line off the highs. The pondering heading into this week was that we may see on the very least a flip down in shares in the near-term, if not looking longer-term.
For a lot of the yr, USD/CAD and the S&P 500 have held a powerful inverse correlation, with it going to just about -1 on events when trying on the 1-month time frame. Recently it’s has strengthened fairly a bit as optimism returns to equities, but when we see threat sentiment bitter the correlation between USD/CAD and the S&P 500 is nearly sure to revert again to a way more adverse worth. The backside line is that if shares drop then USD/CAD ought to rise.
Tactically talking, USD/CAD seems to be set to interrupt out and so the buying and selling bias is to the top-side. If, nonetheless, I see worth flip down right here quickly then that bias will neutralize.
USD/CAD Daily Chart
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—Written by Paul Robinson, Market Analyst
You can observe Paul on Twitter at @PaulRobinsonFX