While the US dollar has been strong on a fundamental basis, due to improvements in US sentiment, the Canadian dollar also seems to be recovering from its recent weakness. The Bank of Canada announced yesterday a reduction of its interest rate by 50 basis points. This move has introduced a counterforce to the recent rally in the USDCAD market. Consequently, the market has entered a consolidation phase around the 1.3815 threshold level.
Key Price Levels:
Resistance Levels: 1.3850, 1.3900, 1.3950
Support Levels: 1.3800, 1.3750, 1.3700
USD/CAD Faces Rejection at the 1.3850 Resistance Level
The USD/CAD market has been undergoing an upward price correction since price action rebounded off the support near the 1.3420 price level. There have been a few interruptions along the way, but the market quickly shook them off. Now, it seems the market has encountered another resistance level near 1.3850. This has caused the market to trend sideways over the past two sessions.
Nevertheless, trading activity continues to occur above the middle band of the Bollinger Bands, which are slightly tilted upwards, indicating the prevailing trend in the market at present. Meanwhile, the Stochastic Relative Strength Index (Stochastic RSI) lines are currently descending toward the indicator’s 80 thresholds.
Will the USD/CAD Market Break the 1.3815 Support Level?
In the USD/CAD 4-hour chart, price action has fallen below the middle Bollinger Band. However, momentum seems to be slowing as the market approaches the support level at 1.3815. Meanwhile, the Stochastic RSI lines continue to drop deeper into the oversold region.
This decline, however, appears somewhat exaggerated considering the magnitude of the price reduction that has occurred. Even the leading lines of the Stochastic RSI have reached the 0.00 mark of the indicator. As a result, it seems that the 1.3815 support level may hold, as downward forces are losing strength too quickly.
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