USD/CAD Technical Outlook
- USD/CAD pulled again sharply in-line with expectations following a faltering in momentum
- Stocks look to nonetheless be susceptible and on that USD/CAD seems poised for extra positive factors sooner or later
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This is a snippet from final week’s USD/CAD outlook, “Weakness might sink USD/CAD 2-300 pips shortly even when solely a pullback given the scale of the run with no retracement.” The considering was that momentum was faltering whereas shares traded across the June lows.
The pullback within the greenback and laborious bounce from round prior bear market lows was within the playing cards given among the extremes, however it doesn’t seem we’re but a significant turning level. On that, USD/CAD ought to agency right here shortly.
There aren’t any nice ranges within the speedy neighborhood, maybe week’s present low round 13500 will turn into one thing significant. If not, then a pair of swing highs from a few years in the past surrounding 13400 might come into play.
On the top-side a run again to close 138500 will likely be wanted to convey resistance, however that stage isn’t anticipated to carry if certainly shares are to proceed additional into bear market territory. The down-move for the reason that summer time excessive has but to point out actual indicators of capitulation, an occasion that might come quickly.
USD/CAD is the FX variation of an inverse S&P 500 lately, as its 1-month correlation stands at a strongly detrimental 0.99. This means on a close to each day foundation USD/CAD is transferring reverse the inventory market.
All-in-all, nonetheless seeing how issues play out right here as shares might rally a bit additional earlier than turning again down. And with no clear ranges but in USD/CAD it’s powerful from a technical standpoint to evaluate threat for longs on this decline. Soon, although, we should always have some good readability to work with.
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—Written by Paul Robinson, Market Analyst
You can observe Paul on Twitter at @PaulRobinsonFX
