With the combined effects of a strong and resurgent US dollar, coupled with the equally dramatic collapse in the price of oil, the USD/CAD has been on an extended bullish trend since late 2104. Indeed the start of the new year has seen this bullish momentum increase dramatically with the pair rising to touch a high of 1.2797, but just failing to breach the 1.2800 level on the daily chart.
However, in the last few days with the US dollar now showing some signs of weakness and oil moving into a congestion phase, this has duly been reflected in the price action on the daily chart for the USD/CAD, with the pivot high of last Friday duly delivering the first sign of weakness. Yesterday’s price action was seminal and may be the first sign of further weakness to come with the wide spread down candle associated with ultra high volume and sending a clear signal of heavy selling pressure with the potential for a sustained move lower in the longer term.
This view is also confirmed with the currency strength indicator to the left of the chart. Here the Canadian dollar (purple line) has been languishing in oversold territory for some time, but is now starting to move firmly away from this region. Equally the US dollar (red line) is now starting to turn lower in this timeframe, and away from the overbought region above, and with some way to travel. Today’s Non Farm Payroll data for the US and the equivalent in Canada, may prove pivotal and should the platform of support in the 1,2370 region be breached then we are likely to a pick up in bearish momentum for the pair longer term.
By Anna Coulling