USD/CAD Technical Outlook: Trending Towards Big Support

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USD/CAD TECHNICAL OUTLOOK

• USD/CAD weakness has been extremely persistent, but nearing reversal spot
• The area between 12458 and 12402 could get tested this week

 

USD/CAD TECHNICAL OUTLOOK: TRENDING TOWARDS BIG SUPPORT

USD/CAD weakness has been persistent since reversing from over 13000. The price action has been consistent with what we have seen for quite some time out of CAD – strong one-way moves and reverse. With that in mind, a test of big support below could lead to another reversal trade.

There is big support from around 12458 down to 12402. This area dates to January when there was a double bottom that led to an extended rally. The January lows were later tested in March and April with price jetting through the double bottom and reversing.

The reversals below the previous yearly low then led to the big move over 13000. But not until after the January double bottom was again tested in April. All of this testing and powerful reversal price action is making for a very strong zone of support.

A push down into support and punchy price action could again lead to a run back to the upside. First up is 12458 and if that doesn’t hold then look for the 12402 level to hold. Ideally, the test of support plays out as it has before where we see a temporary breaking of support followed by a daily close back above.

In the event we see another round of price action like this it could lead to a long opportunity. In the event we see momentum carry price through support then that will be off the table. If we do see support break, though, fresh shorts won’t hold any appeal as the trend will be quite extended. The next level to watch on a break of support will be 12307, a low from last year and the trend-line rising up from 2015.

If we see any strength in the interim before reaching the aforementioned support levels, watch the 200-day at 12658 as resistance as we did see a bit of a hesitation there last week suggesting it is currently influential as a meaningful level.

 

USD/CAD DAILY CHART

USD/CAD Chart by TradingView

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---Written by Paul Robinson, Market Analyst. 6th June 2022 | DailyFX