Canadian Dollar Talking Points:

  • Canadian Dollar weak spot continues as CAD has been one of many few main currencies weaker than the USD.
  • CAD/JPY went deeper into breakdown final evening, illustrating how ‘the trend is your friend,’ following the setup that I checked out in early-November, which began to open the door for bearish reversals in CAD/JPY. The pair is now greater than 1,000 pips decrease with the current assist from the Bank of Japan.
  • The evaluation contained in article depends on value motion and chart formations. To be taught extra about value motion or chart patterns, try our DailyFX Education part.

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The Canadian Dollar continues as one of many weaker world currencies, even weaker than the US Dollar as I had checked out a number of instances over the previous month. In USD/CAD, regardless of DXY digging deeper and promoting off over the previous month, USD/CAD has really had a bullish trajectory, organising an ascending triangle formation. This highlights simply how weak the CAD has been – weak sufficient to not solely outstrip that USD weak spot but additionally weak sufficient to truly create some bullish motion within the USD/CAD pair.

But, maybe extra compelling is the CAD/JPY setup that I’ve been monitoring. What began as a breakout from a symmetrical triangle has now run for greater than 1,000 pips as a spot of long-term Fibonacci assist has come into play. And EUR/CAD has remained on a constant bullish pattern, once more owed largely to that CAD-weakness, and the pair is now discovering resistance on the 2022 highs, the identical space that was holding resistance again in February of this 12 months. Below, I parse by means of every pair.

USD/CAD

The US Dollar has been weak and that is well-illustrated within the DXY chart. After a blistering pattern within the first 9 months of this 12 months, This fall has thus far been retracement within the USD, and that’s helped to carry many main pairs like EUR/USD, GBP/USD and even AUD/USD.

And that USD weak spot initially did present in USD/CAD – from October thirteenth till November fifteenth and sixteenth, when a spot of assist got here into play at prior resistance, plotted at 1.3224. I had highlighted this stage when it got here into play a bit greater than a month in the past and as we stand, that stage marks the present three-month-low.

Since mid-November, nonetheless, CAD-weakness has set the tempo for the key pair and value motion has pushed as much as resistance on the 1.3700 deal with, which has now held by means of a number of makes an attempt from bulls to pressure a breakout.

USD/CAD Daily Price Chart

Chart ready by James Stanley; USDCAD on Tradingview

USD/CAD Shorter-Term

At this level the pair is pulling again after one other failed breakout try. The huge query now’s the place assist might present up, and there’s a spot of confluence simply above the 1.3500 psychological stage, taken from a bullish trendline connecting the lows since mid-November mixed with the December swing low.

USD/CAD Four-Hour Chart

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Chart ready by James Stanley; USDCAD on Tradingview

USD/CAD Bigger Picture

USD/CAD has been fairly robust even with the US Dollar exhibiting weak spot, so if USD-strength comes again, there may very well be a pretty backdrop for breakout potential in USD/CAD. The 1.4000 stage stands proud as a degree of reference, as this stage virtually got here into play a pair months in the past with bulls stalling about 23 pips under the large determine.

USD/CAD Weekly Chart

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Chart ready by James Stanley; USDCAD on Tradingview

CAD/JPY

When I used to be trying into CAD again in mid-November as USD/CAD was sitting on assist, the prospect of broad-based CAD-weakness wasn’t as widely-accepted but. CAD/JPY and EUR/CAD had backdrops that each seemed to be extra amenable to CAD-weakness situations and a bit greater than a month later CAD/JPY is greater than 1,000 pips off.

Of course, the newer driver to the pair, broad-based JPY energy, wasn’t a part of my calculation on the time. But, this exudes the advantage of sticking with the pattern, because the reversal that began in November has solely picked up steam as favorable headlines have helped to push prices-lower.

Price broke from the symmetrical triangle in early-November, after which shortly breached the trendline, which led to a run all the way down to the 100 psychological stage, which held the lows for the previous couple of weeks till final evening’s breakdown.

At this level, the pair could be very stretched and discovering assist at a Fibonacci stage plotted at 96.55. Prior assist now turns into resistance potential, and that is plotted across the 99.49-100.00 space of prior assist.

This market continues to be weak: The complication is timing because it’s already printed a very massive transfer.

CAD/JPY Daily Price Chart

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Chart ready by James Stanley; CADJPY on Tradingview

EUR/CAD

When I began lining up bullish setups in EUR/CAD final month, value was simply beginning to work by means of a bullish push on the 200 day shifting common. Similar to CAD/JPY above, the pair has since moved by greater than 1,000 pips with CAD-weakness taking part in a big position within the transfer.

At this level, costs has now retraced as a lot as 76.4% of the bearish pattern that began final September, with resistance beginning to present at a Fibonacci stage as weekly RSI is exhibiting is overbought for the primary time within the pair since early-2020.

EUR/CAD Weekly Chart

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Chart ready by James Stanley; EURCAD on Tradingview

EUR/CAD

From shorter-term charts, we will see the place there’s no proof but that the pattern is able to flip however, on the identical token, there’s a fairly clear spot of resistance that’s began to stifle the highs. On high of that, there’s been some fairly appreciable higher wicks on day by day candles of late, which is indicative of bulls promoting after contemporary highs, indicating that we could also be nearing a pullback.

Given how robust the pattern had run, plotting that time of pullback generally is a problem. If we draw a Fib retracement on the current bullish transfer, a couple of spots line up however nothing that’s shut by. There’s confluence between the 23.6% retracement and one other Fibonacci stage, with a zone from 1.4188-1.4250, and one other across the 38.2% retracement simply within the 1.4000 psychological stage.

EUR/CAD Daily Chart

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Chart ready by James Stanley; EURCAD on Tradingview

— Written by James Stanley

Contact and observe James on Twitter: @JStanleyFX

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