USD/CAD Forming Short-term Bottom at 1.235011 January, 2018 by Aayush Jindal in Market Analysis
- The US Dollar after a major decline found a strong support at 1.2350 against the Canadian Dollar.
- There was a break above a crucial bearish trend line at 1.2420 on the 4-hours chart of USD/CAD.
- It seems like the pair has formed a short-term bottom and it could move above 1.2560.
- The US Initial Jobless Claims is scheduled today with forecast as 245K versus the previous 250K.
USDCAD Technical Analysis
The US Dollar declined heavily during December 2017 against the Canadian Dollar and moved below 1.2500. The USD/CAD pair traded as low as 1.2355 and is currently moving higher.
Looking at the 4-hours chart, there is a bullish scenario forming from the 1.2355 low. The last few candles are positive and signaling a short-term bottom around 1.2350. The pair has recovered and it recently broke a crucial bearish trend line at 1.2420 on the same chart.
The trend line break at 1.2420 has cleared the path for more recoveries in the near term. It helped buyers to push the pair above the 23.6% Fib retracement level of the last major decline from the 1.2920 high to 1.2355 low.
Should there be a proper close above the 1.2560 level, the pair could accelerate higher towards the 1.2600 level. On the upside, the most important resistance is at 1.2625, which is around the 50% Fib retracement level of the last major decline from the 1.2920 high to 1.2355 low.
Moreover, the 100 simple moving average (red, 4-hour) is also positioned at 1.2630. Therefore, if the current recovery extends, the most significant hurdle for buyers on the topside is at 1.2625-30.
On the downside, an initial support is at 1.2500. Below this last, USD/CAD could retest the last swing low of 1.2420. In the mentioned case, the pair will most likely move back in the bearish zone.
Recently, the US saw the release of the Import Price Index for Dec 2017 by the US Department of Labor. The result was negative, as there was an increase in the index by 0.1% (MoM), less than the forecast of 0.5%.