USD / CAD TECHNICAL FORECAST:
- USD / CAD broke below the confluence support near the 1.2600 zone, a bearish signal for price action
- The broader outlook remains tilted towards the downside
- From a fundamental point of view, the Canadian dollar maintains a constructive profile
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At the beginning of the week, I have argued that USD / CAD could lead lower and break confluence support near the 1.2600 area, should the risk sentiment remain positive. Over the past few days, the market mood has been more stable and less panicky, so the clumsy thesis played well as shown in the daily chart below. After the outbreak, there was some brief congestion, but consolidation appears to be resolving to the downside, with the exchange rate floating to 1.2515 at the time of writing.
In general, the short-term outlook remains downand will remain so as long as the pair sustain the recent outbreak and stay below its 200-day simple moving average, a useful trend indicator. If this scenario realizecan sellers regain decisive control over the market, lowering the stage for the next leg, in which case the focus will shift off to the January lows near 1.2450.
In case of a bullish reversal, traders should see how prices around the 1.2600 area react, which is now the most immediate technical resistance to consider. As the bulls manage to convincingly remove this obstacle, USD / CAD can make progress and challenge the 50-day SMA located at 1.2690. With further strength we can not rule out assault at 1.2800.
From a fundamental point of view, the Canadian dollar looks attractive against the green back. The Bank of Canada’s promise to withdraw stimulus powerful to curb the country’s inflation strong labor market and exchange rate improvement driven by rising oil prices is everyone bullish catalysts. Although the Russo-Ukrainian war is a wild card and could hit unexpectedly riskier currencies, we have not seen a major escalation in recent days. That said, if do the crisis worsecould continue to support the loonie.
USD / CAD TECHNICAL CARD
USD / CAD Chart Prepared Using TradingView
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— Written by Diego Colman, Contributor