USD/CAD had dipped to 1.0620 and seems to be finding some support since then. The price-action during past 6 days has been failing to dip below 1.0600 to enter the psychological ranges of 1.0500. Let's see what else has been going with the currency pair and what can we expect during the coming days.
Past 22 months' price-action of USD/CAD has seen a support trend-line emerging. The recent fall has touched that trend-line again and hence a short-term or possibly even a near-term bottoming can not be rules out. If this support continues then we can see the pair to see some gains in the coming days. Please check the following weekly chart with the support trend-line since early September 2012:
Well, the support of the trend-line does not seem to be alone in the making. This support coincided with the support of the lower edge of the weekly Ichimoku cloud. Do check the following USD/CAD weekly chart with Ichimoku cloud:
The previous bottom for USD/CAD was at 0.9405. The upward move since then had taken the currency pair to 1.1278. The recent move to 1.0620 has not really completed the 38.2%Fibonacci retracement as that level is 1.0562. However, the recent moves may be considered almost as the completion of that retracement as the difference is just 58 pips.
Even if the trend-line resistance fails, a very strong support can be expected slightly below it, near 1.0562. This is not just because of the support of the retracement level but because of the psychological support of 1.0500 ranges.
While we are on it, let's also have a look on the overall historical price-action of USD/CAD.
As the above monthly chart shows, during the first week of February 2002, USD/CAD had hit a high of 1.6193. From there a long-term downtrend had started, which had taken the currency pair to as low as 0.9056 on November 1st, 2007. The recovery from this low had completed the 38.2% retracement but had missed the 50% retracement by going half way towards it. Practically speaking, the moves beyond the 38.25 retracement were very short-lived. The pair had then fell from 1.3063 to 0.9406. The fall was rather sharp but support had come well before a retest of the previous low of 0.9056. The subsequent move had completed the 38.2% retracement of this second leg of the fall. A resistance near the 38.2% level was well expected and that resistance saw the recent leg of downward moves.
The support of 0.9406, which was well over the previous 0.9056 suggests that a bottom may already be in place at 0.9056. The lows have been continuously getting higher and on the other hand recently the price-action had tried to break above the high of past almost 5 years.
The high for USD/CAD during August 2009 was 1.1124 and after almost 5 years the pair tried to break above it repeatedly to touch 1.1278. Yes, we can say that the gains could not sustain, but it was a break of that resistance nevertheless.
Considering all these facts, we remain in favor of upside for USD/CAD technically and at least for near-term. As mentioned above that even if some further downward moves take place, another support should be seen very soon and in 1.5400 to 1.5580 region.
Now, lets take a look on some other charts as well, mainly different time-frames of Ichimoku cloud as we have covered other things more or less.
The above monthly Ichimoku cloud chart shows that the previous attempt of recovery had failed below the upper edge of the daily Ichimoku cloud, when the price had gone as high as 1.3063 and had fallen strongly to 0.9406. However the recent gains had at-least tried to break above the could. The movement could not sustain but for 3 months there was an attempt of breaking over. The monthly candle is still well above the support level of Kijun line, while the Tenkan line stays well above the kijun line, bullishly. The Kijun-line support is at 1.0495 but we would expect a support well above that, as mentioned above.
The above USD/CAD daily Ichimoku cloud chart shows that the currency pair has broken out of the resistance of Tenkan-line, first time, after a month. The current price is again at Tenkan-line level and a support here is expected. Combine this support with the above mentioned support of the mentioned trend-line and we get a feeling for the possible positive outlook for USD/CAD.
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