USD/CAD is still cruising below its descending trend line, and it looks like a quick retest of a broken support zone is due.
Will the area of interest hold as a ceiling?
Let’s take a look at these nearby inflection points on the 4-hour chart.
USD/CAD 4-hour Forex Chart by TradingView
Market players aren’t exactly showing the dollar much love these days, as the U.S. could be facing a ballooning government deficit if Trump’s tax bill gets approved in Senate.
Don’t forget that Moody’s already downgraded the U.S. credit rating last week, allowing USD/CAD to bounce off its descending trend line resistance.
The pair seems to be finding some support near the 1.3700 major psychological level for the time being, possibly leading to a retest of the broken floor near the pivot point level (1.3810) and 38.2% Fib.
Can this area of interest keep gains in check?
Remember that directional biases and volatility conditions in market price are typically driven by fundamentals. If you haven’t yet done your homework on the U.S. dollar and the Canadian dollar, then it’s time to check out the economic calendar and stay updated on daily fundamental news!
If the 38.2% retracement level holds, look out for a continuation of the selloff back to the swing low or to the next bearish targets at S1 (1.3640) then S2 (1.3540).
On the other hand, a larger correction could still test resistance at the 61.8% Fib that lines up with the trend line, dynamic resistance at the moving averages, and R1 (1.3900).
Just be sure to keep your eyes peeled for long green candlesticks closing above the falling trend line since these could hint that a reversal from the selloff is in order.
Whichever bias you end up trading, don’t forget to practice proper risk management and stay aware of top-tier catalysts that could influence overall market sentiment!
Disclaimer:
Please be aware that the technical analysis content provided herein is for informational and educational purposes only. It should not be construed as trading advice or a suggestion of any specific directional bias. Technical analysis is just one aspect of a comprehensive trading strategy. The technical setups discussed are intended to highlight potential areas of interest that other traders may be observing. Ultimately, all trading decisions, risk management strategies, and their resulting outcomes are the sole responsibility of each individual trader. Please trade responsibly.
