Canadian Dollar Continues to Rally; USDCAD Reaches Key Support

by on February 19, 2014 4:35 am BST

The Canadian dollar has seen a rebound against the greenback as recent data has overshadowed the weak data out of the United States, where the reverse was true much of last year. Consumer sentiment increased from a one-month low, and sentiment increased as the full-time job situation seems to be getting better. Data shows that January’s employment data reversed December’s poor print, according to Statistics Canada. The unemployment fell from 7.2 percent to seven percent with 50,500 full-time jobs were added last month.

Price action has trended lower ever since the high of 1.1223 was made on January 31. Support is currently being held at 1.0930, and a break of this level could trigger more technical selling. In “USDCAD Falls From Peak on Canadian Data, Likely to Head Lower,” pointed out that the pair would fall from 1.1029 to 1.0920:

The pair seen a high of 1.223 US dollars to the Canadian counterpart, and price action began to tumble from overbought territory. The pair is likely to continue to correct downward. Interestingly enough, price action bounced off 1.0975 support. However, the ADX has sloped considerably since the peak, which is an indication there is rapid decline in the previous uptrend. There is also a +/-DMI bearish crossover in the works, and this could increase the momentum downward. Potential support areas reside at 1.0920/35, and the psychological round number of 1.0900.

In the same piece, 1.0830 became the target. This still is valid, as long as, the US dollar remains in a downtrend. A Fibonacci fan from the yearly low-to-high suggests that the next level of support of 1.0825/30.

If the dollar is support from tomorrow’s FOMC minutes, a pullback to 1.130 is probable.

1D Chart of USDCAD

1D Chart of USDCAD