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Technical analysis of USD/CAD

The USD/CAD has been trading in an uptrend since the beginning of May, accelerating back above parity and reaching as high as 1.044 in early June before moving downwards to the its current levels at 1.0216. The pair has been trading in a bearish channel ever since and it is currently testing a pullback on the resistance at 1.02 towards the upper band of the bearish channel. If one considers Fed’s decision not to unleash a new round of QE in the immediate future, it looks like there is significant upside for the pair over the medium-term, although the short-term appears to be tilted to the downside. With the RSI hovering around and above the 50 level since April and the MACD signal line over zero for the same period, the bulls seem ready to regain the control of the market. The upside potential is further confirmed by the bullish alignment of the 20 EMA over the 50 EMA on the daily chart that remains in place for the last two months. What is interesting about this pair is its correlation to the oil market. Light sweet crude has been falling in the past 3 weeks and is now poised to test a long-term up-trendline, further supporting the idea that the bears could soon lose their power in these markets. As long as the USD/CAD remains supported ahead of parity and in the 1.01 area, there is room for upside movement towards 1.04. In the alternative scenario, we might have to see a third round of QE for the dollar’s safe haven status to fade away.
USD/CAD Daily chart

WTI Weekly chart

Dafni Serdari
Market analyst
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