For regular readers of my currency futures round up, I have highlighted the weakness in the Canadian dollar for several days, suggesting it was heavily overbought in the futures market. Yesterday’s price action finally delivering the expected move lower for the pair, ending with a wide spread down candle on the September futures contract. The 0.9385 price level had proved to be a bridge too far for the pair, following the nice bullish trend higher from early June, which has seen the CAD/USD climb higher from the strong platform of support in the 0.9100 region, on through resistance in the 0.9200, and finally running into an exhaustion phase and sideways congestion in early July, hitting the resistance as shown on the daily chart with the support and resistance indicator. To the left, the currency strength indicator has also been signalling this move for several days with the Canadian dollar, (the purple line), heavily overbought, with the US dollar ( the red line ) equally heavily oversold. The associated volumes have also been sending their own signals of weakness with the trend higher seeing volumes fall.
With little in the way of potential support below, the pair now look set to move towards the 0.9200 region, where a potential platform awaits, and if this is breached, then expect to see a possible deeper move, back to test the 0.9100 price level in due course.
By Anna Coulling