USD/CAD Bounces Off Trendline Support; 0.9750 is a Critical Pivot
Short-Term
- The decline yesterday in the USD/CAD followed a BOC statement that the market interpret as hawkish.
- This bearish action is so far contained and supported by a rising trendline seen in the daily chart above. Note that the market in the medium to long term is still bearish, as the market remains below the 200SMA. In fact, only a rally above parity (1.0) should be seen as bottoming. Also, an RSI reading above 70 is needed to establish bullish momentum.
- The 1H chart shows the rebound in a sharp manner after finding a bottom. If this rally crosses back above 0.9750 and the 200SMA seen in the 1H chart, the bearish scenario is in trouble, and the market is ranging to bullish in the short-term towards the parity level. Note that this scenario also breaks a declining channel the USD/CAD anchored to in this week’s decline.
- However, respect of the 0.9750 allows for a bearish impulse wave development and the market is ranging to bearish, with a bias towards the bearish continuation scenario. This scenario targets the 0.9445 low.
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