USDCAD Market analysis – Big Breakout Still Possible This Year
The last two weeks of the trading year are notorious for low volume trade. Usually, this means that markets are quite boring, with traders more focused on the current holidays than eking out that last small profit of the year. Though, the low volume environments signify that it can take less capital to progress the markets if there’s a foremost news release or technical breakout. For that cause, it’s still sensible to keep an eye on currency pairs that have important data releases, as well as pairs that are close to any major technical level.
USDCAD confirms both those boxes. The pair rallied effectively to resistance at 1.1670, the 61.8% Fibonacci retracement of the post-GFC fall from 1.30 down to .9400, prior this month. For the last week, rates have been coiling in a fixed range just below this key level, making a short-term bullish pennant pattern. This pattern is only observed as a bullish if we spot a breakout above the top of the pennant, in this case at 1.1670.
That said the secondary technical indicators are supporting the normally bullish outlook on USDCAD. The MACD is moving higher above its signal line and the “0” level, showing bullish momentum, and the RSI remains in bullish area, while the latest consolidation has allowed the indicator to pull back from the overbought area (>70). With these two secondary indicators still pointing higher, the current setting is conducive to a breakout in the exchange rate itself.
As for financial data, we have already seen a number of major US and Canadian reports announced today. Loonie traders got their first look at October GDP, which came out superior than predicted at 0.3% m/m vs. 0.1% eyed. Temporarily, below the 49th parallel, the US saw a massive surprise this morning as the Final Q3 GDP reading came in at 5.0%, its maximum quarterly reading since Q3 of 2002! The more timely durable goods data, which dropped by 0.7% vs. a 3.0% gain estimated, took a little of the shine off the stellar GDP reading, but the current strength in the greenback shows that traders believe the US market is pulling away from the global pack, even against its close trading partner to the north.
If USDCAD can break above 116.70 resistances on the back of this morning’s strong US data, a continuation toward the top of the bullish channel in the mid-1.1700s might easily come into play by New Year’s Day. The medium-term bias will remain higher within the well-established bullish channel, if the pair fails to break that foremost resistance level though.