The Canadian dollar has lost a lot of ground against the US dollar in the last few days. The USDCAD pair recently traded as high as 1.0868. However, we need to be very careful moving ahead, as the pair is approaching a major resistance area, which might result in a pullback in the pair.
There are also major risk events lined up later during the day. So, we can say that the US dollar is at major risk of a correction against the Canadian dollar in the short term.
Technically, there is an ascending channel formed on the 4 hour chart for the USDCAD pair. The channel resistance currently lies around the 1.0880 level, which also coincides with the 76.4% fib retracement level of the last drop from the 1.0960 high to 1.0620 low. So, the 1.0880 holds a lot of importance for the pair, and if the pair trades closer to the mentioned level, then it might struggle to trade above it. In that situation, the pair might drop lower and test the channel support area, which is currently around the 1.0780 level. One more important thing to note here is that same level acted as a barrier earlier as well, so, it might act as a pivot zone moving ahead.
The RSI on the 4 hour chart is around the extreme levels, which increases the possibility of a correction in the short term.
So, we need to keep an eye on the channel resistance area around the risk events like the US GDP and the fed interest rate decision. The chance of a break above also cannot be denied considering the economic releases that are lined up.
Posted By Simon Ji of IKOFX
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