The Canadian Dollar is in a correction today,while the pair remains in uptrend.
The dynamics in the pair are largely affected by the price of oil, one of the main sources of exports for Canada, and the outlook of the US economy, its biggest trading partner. So while the American economy shows, perhaps, the healthiest recovery amongst top world economies, Canada is not doing too well. The price of oil, on the other hand, depends on many factors, but the shape of the Chinese economy is a significant one as China is one of the largest oil consumers. The pair, therefore, is likely to keep growing until things are getting back to normal in Asia.
Support and resistance
The medium to longer-term trend is ascending, as the price is trading above its 130, 65 and 13 period moving averages, which are heading upwards.
The weekly chart, however, shows the price above the 130 MAby about its critical distance. A deviation between the price and its 130 MA for the last 20 years of about 1800 to 1900 points would result in a correction in the pair.There is, however, some room for growth still but traders should be cautious.
On the daily chart, the RSI and Composite bounced off their resistances and heading towards MA’s. There is a small diversion between the indicators. MA’s suggest a strength of the market.
On the 4-hour chart, the Composite approached its support it tested in the beginning of the week, while the RSI turned up and might test its long MA shortly. The indicators start diverging, warning of a possible reverse upwards. Their MA’s indicate a strength of the market.
Support levels: 1.3387 (MA65 on the hourly chart), 1.3363 (psychologically important level), 1.3257 (50% retracement), 1.3152 (38.2% retracement).
Resistance levels: 1.3430 (local high), 1.3524 (short-term target), 1.3687 (medium-term target), 1.3800 (psychologically important level).
Open long positions after the price rebound from the level of 1.3387with targets at 1.3430, 1.3524 and stop-loss at 1.3360. Validity – 1-3 days.