USD/CAD Price Forecast: Loonie Gunning for a Huge Game-Changing Trend Line Test

  • USD/CAD is fast heading towards a big retest of a vital ascending trend line.
  • US government shutdown stalemate continues, almost two weeks now.

In line with the broad dollar weakness that came back into play late on Thursday, USD/CAD is heavily weighted to the downside. The loonie at the time of writing is seen down a big 100 pips. The bears are heading towards a big retest of a critical near-term trend line. This has been running to the upside since the very start of October, where the price was a low at 1.2782. The bulls managed to run up to a high area between 27th December to 2nd January at 1.3662.

Looking at the chart, the move was very much inclined and steady, the above move was a rally of almost 900 pips. The area mentioned above where the bulls peaked was the highest print seen since May 2017. Therefore, it was a considerable amount of weakness seen for the Canadian dollar versus the U.S. dollar.

It is interesting to note that fundamental factors would have played a part in this rocketing to the north. A main standout factor being monetary policy divergence, between the Federal Reserve and the Bank of Canada. The FOMC were pressing at the time with rate hikes, while the BOC were hinting and have slowed down their rate hiking cycle.

Government Shutdown Stalemate

The partial U.S. government shutdown is very much heading towards two weeks now, with still a lack of certain end in sight. In terms of negotiations to reopen the government they are still at a stalemate between the White House and congressional Democrats. As previously covered via Hacked in a USD/JPY article, President Donald Trump wants $5 billion for his border wall. Democrats are not backing the President’s demands by any means.

Technical Review

USD/CAD daily chart. Price action is heading for a big retest of a vital ascending trend line.

The above-described trend line at the time of writing is under threat. In terms of the support, it is seen tracking at around 1.3460-50 area. A breach will likely invite a fresh chunky wave of sellers. Furthermore, the next major support area can be eyed within the 1.3300 territory. This is where the price consolidated briefly between 10-14th December. Should this fail to hold, then keep an eye on the 1.3150 region, the price gaped lower here on 3rd December.

Featured image courtesy of Shutterstock. 

Author:
Ken has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.