In fact, during the early part of the Friday European session, the USD/CAD currency cross shot up to a fresh six-month peak. This explosive move exemplified bullish momentum following a recent bullish breakout. Traders are closely scrutinizing the pair’s activity versus key technical levels. They are closely monitoring outside market developments, particularly crude oil prices which have significantly affected the value of the Canadian dollar.
During Friday’s trading, the USD/CAD pair exhibited strength, indicating a potential to build on the momentum established from the previous day’s breakout above a crucial 200-day Simple Moving Average (SMA). The breakout indicates a new bullish trend has begun. Economists are under the impression that the duo will look to test the psychological 1.4100 mark. Such an accomplishment would continue to build upward momentum and put the 50% Fibonacci retracement level in view.
Despite this bullish outlook, caution remains warranted. The daily RSI for the USD/CAD pair is currently trading right around overbought levels. There are signs that buyer pushback is coming soon. The 23.6% Fibonacci retracement level has been an important line in the sand for traders. It shows you areas where price is likely to reverse or change direction.
Now the Loonie, as the Canadian dollar is nicknamed, is again under pressure as crude oil continues to fall. This dramatic decline has turned out to be a powerful tailwind for the USD/CAD currency pair. This squeeze has brought the pair right up against its weekly low. Traders are now fearful of follow-through selling that could take it below the 1.3900 level. If so, the next area of support worth watching could be around 1.3865-1.3860.
Market analysts are keenly focused on the USD/CAD pair. If it falls under the 1.3840 area, they expect a move to a predominantly bearish outlook. Any eventual corrective slide in the currency pair should produce a fine buying opportunity. Watch for pullbacks to around the 1.3980-1.3975 area, a zone where the 200-day SMA currently resides.
Traders are intensely focused on these dynamics. They further acknowledge that the USD/CAD cross is on track to complete its third consecutive week in the green. Bulls are becoming more bullish on this trend. They’re understandably still gun-shy, as there’s not been any meaningful continuation buying beyond that important 38.2% Fibonacci retracement level.
If you’re bullish onto the USD/CAD pair, new positions likely should wait for a solid move above 1.4030-1.4035 zone. That area represents an important, multi-month top. Such a development would provide the basis for continued upward movement and greater confidence from market actors.