The USDCAD is at a crossroads. Just the other day we discussed the trend line support that extends from the current 2017 low. That level intersects with the 1.2770 horizontal level near current prices.
Yesterday’s session attempted to close back above the 1.2770 handle. However, buyers fell short of their goal and are once again struggling today.
This puts the USDCAD in a delicate position. If the pair can’t manage a daily close (5 pm EST) back above the 1.2770/5 area, the only option is a move below trend line support near 1.2720. If that occurs, we could see prices slide toward 1.2590 and perhaps 1.2420.
On the other hand, if buyers manage a daily close above 1.2770 it would put us right back to targeting 1.2915 followed by 1.3000.
It’s no secret the U.S. dollar has struggled lately. That said, the Canadian dollar has performed even worse. The stalemate between the two is the reason for the terminal pattern below.
In times like this, it’s important not to draw any conclusions until we have some form of confirmation. In the case of the USDCAD, that means a daily close below trend line support near 1.2720 or above horizontal resistance at 1.2770/5.
Until that occurs, the likely path forward is unclear. Although as you can see, the limited real estate will force participants one way or the other within the next few sessions.
A word of caution, though. Recent market conditions have proven difficult, both in reading the price action as well as garnering follow through. With this in mind, it may be a good time to reduce position sizes or scale into positions so as to mitigate potential losses.
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