USD/CAD in a Bullish Breakout Attempt

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USD/CAD in a Bullish Breakout Attempt

The USD/CAD has been rallying since last week’s low of 1.2410. As we can see in the 1H chart, it came up to 1.2784 before finding resistance. Then after an outside bar in the 1H chart, USD/CAD began to slide.

USD/CAD 1H Chart 4/2
usdcad 1h chart 4/2
(click to enlarge)

The 1H chart shows that price action broke below a rising trendline from last week’s low and the 1H RSI fell below 40. This shows loss of bullish structure and momentum.

The descent was supported at 1.2575, where the 200-hour SMA resided. Price found support here and is now pushing above the near-term falling channel resistance. As we get started with the US session, USD/CAD is at a key level around 1.2650, which was a previous support pivot, and also where the 100-, and 50-hour SMAs reside. A break above 1.2660 would probably revive the upside risk towards 1.2784, but it would be tough to break above it before the NFP.

In fact, the 1.27 handle appears to be an appropriate “rest stop” for USD/CAD as it squares up ahead of tomorrow’s Key US jobs report.

USD/CAD 4H Chart 4/2
usdcad 4h chart 4/2
(click to enlarge)

While we should not be too aggressive ahead of the NFP, we can favor the bullish outlook with confidence when looking at the 4H chart, especially in the context of the price action in the daily chart.

The 4H chart shows a sideways market. However, the latest price action is holding above the bottom cluster of the moving averages. Also, the RSI has tagged above  70 and is holding above 40. These are signs that while the trend in the past month is flat, there is bullish development in the past week that can revive the bullish mode USD/CAD saw in the medium to long-term.

USD/CAD Daily Chart 4/2
usdcad daily chart 4/2
(click to enlarge)

In the daily chart, we see a market that is bullish despite a multi-month consolidation. Price is still above the moving averages, and the RSI is still holding above 40 after tagging above 70, even above 80. Unless Friday’s NFP falls near 200K or lower, we should see the medium-term bullish trend intact.

A break below 1.24 will be needed to introduce a price topping outlook.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.