The USDCAD has been sputtering, with slower momentum. The upper trend line is stepping higher, but the slope of the line is more flat vs the lower trend line. This suggests the potential for a tiring market and indeed the break over the last few hours has led to more selling “this time”. “This time” because the pair has tried twice and failed twice yesterday and again earlier today. The market finally got the push it needed.
USDCAD momentum slows but 100 hour MA stalls the fall.
That is the good news for the sellers. The bad news is that the sledding can be a little difficult when correcting a trend move that had as a catalyst a surprise cut by the Bank of Canada. So although the sellers through the last break of the trend line are being rewarded, there will be hurdles ahead. It just makes sense.
One such hurdle is the 100 hour moving average (blue line in the chart above). On the move lower today the price decline has stalled against that moving average level. If you were go back to the beginning of the year (jan 2) and count up the hourly bars that have had closes below the 100 hour MA, the total is just 21 hourly bars. Today is the 18th trading day of the month. So my napkin math says 21 out of approximately 432 hours have traded below the MA line (18 x 24 hours – 432 hours). Calculator math, says that is only 4.8%.
Nevertheless, the pair does have the potential to correct further but it needs that help from the next break -the next push.
If done, traders will be looking for the pair to next target the 1.2325-32 level. The 1.2332 is the 38.2% of the move up from the pre-cut low last week. The 1.2325 is the 200 month MA (see chart below). The move above the 200 month MA was the first look above the level since May 2004. That is a long time. Traders might be disappointed if the price dips back below, but I still gotta give the nod to the dip buyers. So expect the persistent correction shorts (and dip buyers) to step in against the level on the first test (just like the 100 hour MA).
Sellers from the break above, have the advantage but the open road is not really all that smooth. However, if some pot holes – mainly at the 100 hour MA – can be traversed without much damage, there should be some further room to roam.
USDCAD broke above the 200 month MA in January.
