USDCAD has recently broken past the 1.1200 major psychological resistance and zoomed close to the 1.1400 handle in the past weeks, before showing signs of a forex trend retracement. Price is now retreating back to the 1.1200 area, which lines up with the moving averages and the Fibonacci levels.
In particular, the 50% Fibonacci retracement level lines up with the 100 SMA while the 200 SMA lines up with the 61.8% Fibonacci retracement level. This is also within the vicinity of an area of interest or former resistance zone.
Forex Trend Forecast
Stochastic is almost in the oversold area, indicating that there’s a bit of selling pressure left but that a forex trend bounce might take place soon. MACD is also heading lower, which could lead USDCAD to fall until the 1.1200 support zone before recovering.
If that happens, the pair could find its way back to the 1.1400 highs or perhaps head further north. On the other hand, a downside break from the 1.1200 support zone could lead to more losses for the pair and possibly a move to the next support area at 1.1100.
Bear in mind that US retail sales came in weaker than expected while Canada’s employment report released in the previous week came in better than consensus. This could pose a downside risk for the pair in the meantime, although weaker oil prices are also weighing on the Canadian dollar.
Event risks for this forex trend setup include the release of US initial jobless claims, Canadian manufacturing sales and foreign securities purchases data. Strong data from the US could keep the dollar afloat while weak figures from Canada could push the Loonie back in selloff mode once more. Going long at 1.1200 with a stop below 1.1100 and a target of 1.1400 could yield a 2:1 return on risk for a short-term trade.
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