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USD/CAD Forecast May 27, 2016, Technical Analysis

By:
Christopher Lewis
Published: May 27, 2016, 03:54 UTC

The USD/CAD pair initially fell during the day on Thursday, breaking down below the 1.30 level given enough time. We ended up turning right back around to

USD/CAD daily chart, May 27, 2016

The USD/CAD pair initially fell during the day on Thursday, breaking down below the 1.30 level given enough time. We ended up turning right back around to form a hammer during the session on Thursday and that of course is a very bullish sign. At this point in time, if we can break above the top of the hammer, it could very well be a signal to start buying. However, there is the 200 day exponential moving average above as pictured on the chart, so that could be a bit of a stumbling block. With that being the case, expect quite a bit of volatility, but it is very possible that we could send this market higher and with that being the case it is a very interesting pair for us at the moment.

A break down below the bottom of the hammer would be a very negative sign, but it’s really not until we get well below the 1.28 level that I would feel comfortable shorting. That would be a very disastrous turn of events for the US dollar against the Canadian dollar, but would have to coincide with something going on in the oil markets, namely the oil markets rallying significantly. With this, it would be a bit of a nice correlation and should continue the downward pressure that we have seen. On the other though, if the oil markets fall apart, that would drive this market higher as the US dollar would strengthen against a petroleum-based currency such as the Canadian dollar. Recently, the Bank of Canada did not cut interest rates, so that was a little bit supportive of the currency, but at the end of the day we now believe that the market is over that and now is looking to make a definitive trade. Once we get above the 200 day exponential moving average, I believe that it becomes more or less a “buy-and-hold” type of situation. Regardless, you’re going to have to keep one eye on this chart, and another eye on the petroleum markets.

About the Author

Being FXEmpire’s analyst since the early days of the website, Chris has over 20 years of experience across various markets and assets – currencies, indices, and commodities. He is a proprietary trader as well trading institutional accounts.

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