USD/CAD holds key longer-term support levels
USD/CAD has been trading mostly sideways over the past four months but, more importantly, has been holding perfectly above the 100-week moving average, marked by the blue line in the weekly chart below.
We therefore have very important support around 1.2760/1.2750 as we become oversold on the daily chart. We must also watch for further support just below from the 15-month trendline at 1.2665/1.2655. This area matches the three-month lows seen in June and longer-term bulls can use this as a buying opportunity again.
Longer-term trades generally require wider stops and in this case it might be wise to place them below 1.2580. If stops are activated this signals a resumption of the correction. Bear in mind that a break below this year’s low at 1.2458 would be further confirmation of negative sentiment and we could head towards 1.2160.
The USD/CAD daily chart below shows the sideways trend since the middle of May this year. We have bounced from the very short-term two-month trendline support this week, but will need to beat 1.3000 if we are to head up towards the middle of the four-month range to target intersecting trendlines at 1.3120/30. This should be an important challenge and it’s only a break above the late-August high at 1.3145 that would signal further gains, heading towards strong resistance from the 200-day moving average and the four-month trendline resistance at 1.3270/1.3295.
USD/ZAR sold off to strong support from the longer-term Fibonacci area at 13.55/13.50 down to the 100-week moving average and three-and-a-half-year trendline support area at 13.30/13.20 in August. The weekly chart below shows a very strong bounce from mid-August to the beginning of September, but we are starting to drift lower again, having failed to test the upper trendline.
We could now head back towards the 13.55/13.30 support area to offer another buying opportunity. Just be aware that a break below the October 2015 low at 13.00 would then be seen as a sell signal having confirmed a breakdown of the support. We could then quite quickly target the March and June highs for 2015 at 12.64/12.53.
Bulls now require a break above the eight-month upper descending trendline at around the 15.00/15.05 area. Further confirmation will come with a push up through 15.18, which would allow the pair to target 15.56/15.68 and the early summer highs of 15.87/15.97.
Technical Analyst & Trader
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