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USDCAD – Simply Overnight Correction?

Market Analysis

USDCAD, H4

In the 4-hour chart, USDCAD prices today got back below the 20, 50 and 200- period MA after yesterday’s lift from opening lows near 1.2615 to 1.2659 highs, by the weak Canadian manufacturing data earlier. Overnight, USDCAD had rallied further up to 1.2690, supported by U.S. politics which continues to roil markets, with the latest being rumors that Trump’s chief economic advisor Cohn may resign. Wall Street has taken a tumble on the rumors, supporting USDCAD as risk-off conditions emerge again.

Today however, the pair looking southwards, with US dollar coming under some broader pressure. The USDCAD formed earlier a Shooting Star pattern at the lower Bollinger bands area, in which is moving the last 2 Days. The Shooting Star pattern consider be a Bearish reversal signal. Meanwhile the wider picture of USDCAD is in a continuous weakness seen since April, with the loonie staging a furious rally in July amid the BoC’s rate hike and hawkish guidance. This wider weakness can be identify in the Daily Chart, in which the pair moves below a strong resistance level set by trend line since year’s high. The particular trend-line, indicates the current resistance level at 1.2780,  which was set also as a Support level in today’s entry. 

Hence after Shooting Star formation and on the anticipation of today’s Canadian CPI data which expected to slightly increase by 0.1%, a Short position was taken with entry at 1.2642. The First 4-hour Target was set at 20-Day MA, which is also near Yesterday’s low, at 1.2580. The second Target, is a Daily Target at 1.2540.

Nevertheless, in both timeframes, such as the 4-hour and Daily one, the parabolic SAR and MACD remain negative.

 

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Andria Pichidi

Market Analyst

HotForex

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