USD/CAD Testing 61.8% Bearish Retracement Level, Cautious Investors Wait
Dwayne Buzzell | May 24, 2018 06:52AM ET
The USD/CAD pair started its bearish rally after hitting the major resistance level at 1.31199 and most of the leading investors managed to execute short orders with bearish pin bar formation in the daily chart. The pair found some solid support near the critical resistance level at 1.25402 and started to recover its loss. The bulls are now in great trouble since the pair rejected 61.8% bearish retracement level drawn from the high of 19th March 2018 to the low of 17th April 2018. A daily closing of the price above the critical resistance level at 1.28963 will confirm the initial bottom formation of the pair at 1.25402.
USD/CAD daily chart analysis
Figure: USD/CAD rejecting 61.8% bearish retracement level
From the above figure, you can clearly see the rejection of 61.8% bearish retracement level. Since the price is trading at a consolidated region, there is a high chance we will see another retest of the critical resistance level at 1.28963(61.8% bearish retracement level). The expert traders in the Forex trading community will be looking to short the pair near 1.28963 level with a tight stop above the high of 32 may 2018. If the bulls manage to clear the critical high, the overall bias for this pair will turn into bullish. The first initial bullish target for this pair would be the critical resistance level at 1.3000. A clear break of the price above that level will lead this pair towards the next major resistance level at 1.31199. This level is going to provide a significant amount of selling pressure to this pair and the buyers will have to work very hard to clear this resistance level. A daily closing of the price above that level will ultimately confirm the end of the medium-term bearish trend of this pair and the long-term bullish trend will come into action.
On the downside, we need to break below the major resistance level at 1.27323 to establish fresh selling pressure. But clearing out the support level will be extremely hard due to the recent weak performance in the U.S economy. The U.S dollar index which measures the overall value of the green buck’s strength against six major currency pairs is trading mixed due to pending rate hike decision from the FED officials. However, the dollar bulls have gained decent bullish steam as FED chairperson Jerome Powel stated June rate hike imminent unless they face any major economic barrier.
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If the sellers manage to clear the critical support level at 1.27323, the price of USD/CAD pair will drop towards the next major support level at 1.25360. This level is very important to swing point and the leading investors will be eyeing on this level. Any bullish price action confirmation signal near the major support level at 1.25360 will be an excellent opportunity to execute fresh long orders. The price movement of USD/CAD pair is closely related to the price of oil. Canada is the fourth largest oil exporter in the world, its economy is greatly related to the stability of energy field. Currently, the price of crude oil is testing major support level and if it breaks below 70.80 mark, we will see a strong bullish rally. But chances are very high the oil bulls will drive the price significantly higher which will eventually push the USD/CAD pair.
Considering the technical and fundamental factors of the market, the overall bias for the USD/CAD pair remains bearish. However, a clear break of the 61.8% retracement level will change the overall market sentiment. But shorting the pair at the current price level will be an aggressive act due to the use of wide stop loss. So it’s better to wait on the sideline and short the pair at a higher price with price action confirmation signal.
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