Our focus today is on the USD/CAD pair as the bulls are looking for new support in forex after breaking out of the range last week.
The US dollar (USD) is rising in forex and we recently saw the DXY index hit 109 yesterday, testing the July high. The forex bullish momentum was short-lived as sellers took control of the New York session, sending the index price to a lower close for the first time in seven sessions.
USD/CAD capitalized on recent bullish momentum reaching 1.3063 yesterday before the US dollar lost its bullish momentum and oil rallied strongly. Oil is an important factor for this pair, and usually when it is stronger, the Canadian dollar becomes stronger, so the USD/CAD pair can trade lower.
Last week, as the US dollar gained momentum, we saw the price of the USD/CAD pair break above the 1.2930 range. Since then, the price has continued to rise for four sessions. Yesterday was the first drop after the breakdown, and it was decent (-0.82%). Today’s price saw demand and we see higher prices finding support from the previous breakout point, which also supports the current uptrend.
These are bullish signs, but we need to see yesterday’s low. If we do this, we will continue to look for the current trend in order to continue rising. But if we see a further decline that crosses the green box (shown on the chart), we may see a deeper down reaction, which could also confirm a break in the trend.
Buyers are now forced to support today’s rally and continue trading above 1.2935.
USD/CAD daily chart
Thank you for reading today’s update. We hope you enjoy the rest of your day at the markets.
Joseph Jeffries, Market Analyst, Eightcap
Disclaimer: The information and opinions contained in this report are for general information only and do not constitute an offer or solicitation to buy or sell any currency contracts or CFDs. Although the information contained herein has been obtained from sources believed to be reliable, the author does not warrant its accuracy or completeness and shall not be liable for any direct, indirect or consequential damages that may result from anyone relying on such information.