USD/CAD eyes a breakout as support and resistance converge
USD/CAD has fallen over 12 big figures from the mid-March high and now nears a crucial breakout zone as technical indicators collide.
USD/CAD technical outlook and price chart
- Ongoing US dollar weakness supports bearish USD/CAD price action
- IG client sentiment (IGCS) positioning adds weight to further USD/CAD downside
USD/CAD pressing against trend resistance once again
The Canadian dollar’s appreciation against the US dollar has come to a halt and is now testing both trend resistance and horizontal support based off multi-month lows.
The downtrend has held firm in recent days, apart from a false breakout in mid-July, and price action over the next few days will decide the pair’s medium-term outlook. The chart shows a bearish ‘death cross’ was made on 22 July, when the 50-day simple moving average (SMA) - the green line on the chart - fell through the 200-day SMA (the black line on the chart).
Support for the pair is seen around $1.3314, the 10 June low, and the top of the old trading range that held sway until the late-February break higher. With the downtrend set to cut across this support level shortly, a breakout is expected to happen as the apex of the two lines nears.
IGCS retail trader data shows 66.30% of traders are net long, with the ratio of traders long to short at 1.97 to one. The number of traders net long is 1.37% higher than yesterday and 17.91% higher from last week, while the number of traders net short is 9.63% lower than yesterday and 28.84% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net long suggests USD/CAD prices may continue to fall. Traders are further net long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger USD/CAD bearish contrarian trading bias.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
Please see important Research Disclaimer.
Start trading forex today
Trade the largest and most volatile financial market in the world.
- Spreads start at just 0.6 points on EUR/USD
- Analyse market movements with our essential selection of charts
- Speculate from a range of platforms, including on mobile
Live prices on most popular markets
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.