Investing.com - Financial Markets Worldwide
Get 40% Off
Get 40% Off
🚨 Volatile Markets? Find Hidden Gems for Serious OutperformanceFind Stocks Now

USD/CAD: Starting A Long Term Downtrend

ByAlan Posner
Published 04/26/2015, 07:43 PM
Updated 07/09/2023, 06:32 AM


For nearly three months the USD/CAD pair has been in a consolidation period. Looking at the first chart below, price broke through the 1.24 area on January 22nd and retested this area establishing it as support on January 27th. Soon thereafter on January 30th, price established a high just short of 1.28 and from there fell and subsequently rallied on multiple occasions until April 15th. This period of consolidation has formed a top in a long term rally USD/CAD started in September 2012.

From a fundamental perspective this consolidation/top has been constructed around falling oil prices and a weakening Canadian economy . The quarterly GDP numbers fell in Q2-Q4 2014: 0.9, 0.8, and 0.6. The significance of the price selloff on April 15th is the Bank of Canada’s decision not to cut the overnight lending rate lower than the current .75%. The BoC clearly was more concerned about keeping inflation under control versus trying to stimulate the economy through monetary stimulus. The forex market responded by projecting lower economic growth numbers moving forward.

This analysis means USD/CAD will continue to fall for an extended time and rallies are best sold. Where will this sell off end? Looking at the second chart (weekly chart) we can see the 50% fibonacci retracement from the price low on September 9th, 2012 to the high on March 16th, 2015 rests at 1.1227. This is an area price has found resistance in February and March of 2014 and been treated as support in October and November of 2014. This is the first area price may find longer term support.

Significant news this week from Canada on Thursday when their monthly GDP report is released.

USD/CAD Daily Chart
USD/CAD Weekly Chart

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Latest comments

Install Our App
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.