USDCAD is one to watch next week, especially as it approaches 1.3300.
It promises to be a significant level that will likely attract a lot of demand.
But before we get to that, I want to mention two critical points for anyone trading USDCAD or any major currency pair.
The first is the USDCAD sideways equidistant channel since 2015.
Note that USDCAD has traded within this pattern for the last eight years.
It also last touched support in 2021 and has trended higher since then.
That’s an important distinction as it tells us the short-term and intermediate trends are bullish, while the long-term trend is bullish to neutral.
I want to make a second point regarding the US Dollar Index (DXY).
We recently saw DXY test a macro support area around the 102 handle. That’s also the location of the May 2021 trend line.
While the dollar index may have broken minor support levels, it’s difficult to claim that the DXY broke the macro support above.
It’s a level that dates back to 2016, so any daily or even weekly breaks are suspect.
There’s also a descending trend line support that I’ve mentioned to members, which currently resides at DXY 101.20 next week.
That will be an area to keep an eye on as it will likely attract considerable demand.
All of the above will affect a pair like USDCAD as it relates to the analysis below.
So for this pair, I’m watching the July 2021 trend line support near 1.3300 as we enter next week.
The 1.3300 area could line up with the 101.20 DXY level.
Any retest of that USDCAD area will likely trigger a bounce, while a daily close below it would open up lower levels, including 1.3320. and potentially 1.3020.
The USDCAD consolidation below could also lead to a larger move for the pair, depending on which way it breaks.
But either way, the US dollar is signaling a significant inflection point that could set the trend in 2023.