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USDCAD may continue upwards to retest the 1.3460 high
THE movement of the USDCAD has been range bound. It continues to move sideways constricted within a narrowing range during the past month following a strong move in the early weeks of March 2019. From the 4 hourly charts, we see that USDCAD is bound by the price levels of the recent high at 1.3460 and low at 1.3250.
After establishing the recent low, USDCAD started printing subsequent lower highs and higher lows suggesting the creation of a potential triangle pattern on the charts. Traditionally a triangle chart pattern could mean either a reversal or continuation of the previous movement. In the case of USDCAD, if we take the recent up-thrust in March as a reference, a continuation would mean that we expect USDCAD to move higher up.
In our view, this would largely depend on how the pair continues to react to the critical support at 1.3320 which has been tested and respected several times within the last two months.
When placing a Fibonacci retracement against the entire upward move encompassing the end of February to early March, we see that the support level also confluences with a nearby 50 per cent retracement level at 1.3290.
If price were to break through this strong support level, it could cause the price to tumble downwards to test the 1.3150 levels as the next potential support level. Otherwise, if USDCAD continues as we expect it to and move up, we would likely see the price continue upwards to retest the 1.3460 high.
By adding the stochastic indicator to the charts, USDCAD can be seen as being on the cusp of tilting towards the oversold region which is an indication that the market expects the price to turn upwards. USDCAD has just begun to move below the 50 percentile level at the point of writing on the indicator, and this could be a sign that the market expects the move to be more drawn out unless there is a catalyst to ignite the move.
With that in mind, it would be interesting to see how the pair continues to move as the market would be reacting to the scheduled Opec meeting taking place on April 17 which coincides with the release of Canadian economic numbers, month to month CPI and Trade Balance figures.
- The writer is senior strategist at Phillip Futures.
Disclaimer: Chartpoint is provided by Phillip Securities Research for information only, and should not be construed as investment advice.
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