USD/CAD Outlook December 24-28

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The Canadian dollar retreated as new worries about the fiscal cliff in the US strengthened the greenback across the board. In this week of Christmas, there are no events scheduled in Canada, so the outlook is only an updated technical analysis for USD/CAD.

Just before the holiday, Canada had a very busy week: GDP rose by 0.1% as expected, but inflation remains weak and could cause the BOC to become more dovish. On the positive side, retail sales and wholesale sales rose more than expected, and so did foreign securities purchases. The trouble came from the fiscal cliff: a week that began with optimism ended with a collapse of negotiations and a collapse of Plan B. This theme will continue rocking currencies, despite the holiday.

Updates: The Canadian markets are closed Tuesday and Wednesday, and no releases are scheduled this week. USD/CAD remains rangebound in thin trading, and the pair was trading at 0.9932.

USD/CAD daily chart with support and resistance lines on it. Click to enlarge:USD CAD Technical Analysis December 24 28 2012

USD/CAD Technical Analysis

Dollar/CAD  started the week with another slide towards the 0.9817 line (mentioned last week), but yet again, the pair eventually rose. A late rally send it above 0.9910.

Technical lines, from top to bottom:

1.02 was the trough of 2009 and remains important since then, working in both directions. Another round number, 1.01, was a trough back in July, and switched to resistance afterwards.

1.0066 was key support before parity. It’s strength during July 2012 was clearly seen and it gave a fight before surrendering. It has a stronger role after capping the pair during November 2012.

The very round number of USD/CAD parity is a clear line of course, and the battle was very clear to see at the beginning of August 2012. 0.9950 provided some support for the pair during November and worked as resistance earlier. Its stubborn behavior as resistance in December proved its strength. This line is close once again.

0.9910 remains the chart after serving as a bottom border for the pair in November 2012. It already managed to work as weak resistance in December 2012. 0.9880 showed that it is a clear separator in October 2012. It also had a role in the past. This line switches roles once again.

0.9817 was a stubborn peak in September and is now significant support. As seen in December 2012, this line worked as a cushion. Lower, 0.9725 worked as strong support back at the fall of 2011 and showed its strength once again in October 2012.

0.9667, which was another strong cushion in June 2011 is the next line. The round number of 0.96 provided some support back in 2011 and is minor now.

Further below, 0.9406 is the post crisis low.

I remain bearish on USD/CAD.

The current crisis in fiscal cliff talks could be temporary. After the pair rose from strong support, it could slide in range once again.

Another technical view: USD/CAD Tentative Breakdown Below Support

 Further reading:
Get the 5 most predictable currency pairs

About Author

Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.