Forex Technical Update
USD/CAD 4H Chart 5/7/2012 9:40 AM EDT
During the 4/30-5/4 trading week, the USD/CAD rallied from 0.98, but was stuck below 0.99 for most of the week, until Friday's Non-Farm Payroll data came out. Then the CAD lost across the board, as WTI crude oil fell more than 5%, below 100 (The CAD is correlated to oil, so a drop in oil prices was coupled with the drop in CAD).
The 4H chart shows that the market pushed above 0.99 sharply, and pushed the 4H RSI reading above 70, establishing sideways to bullish momentum in the short to medium term. There is a throwback at the moment as the 5/7 US trading session gets underway. The 0.99 level should now be monitored for support. If the market can hold above this, the upside remains toward at least parity (1.00), but is limited to the 1.0050 resistance for now.
A break below 0.99 however re-opens the 0.98 area, and confirms bearish bias, albeit in a choppy mode.
Looking at the daily chart, the RSI reading after holding below 60, failed to break back below 40, so although the overall bearish momentum established since the drop in November is still holding, it is not continuing. Now as it goes back up, 60 will again be a resistance for the RSI. Meanwhile, 1.0050 is a key resistance cluster of the 200-day simple moving average, and range resistance going back to January.
Fan Yang CMT is a trader, analyst, educator and Chief Technical Strategist for FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
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