TA of the Day: Key Support Level in Sight for USD/CAD 👀

the Canadian Dollar (scoundrel) strengthened against the US dollar (American dollar), hit a two-week high as market volatility eased.

As the turmoil fueled by yen-financed debt reductions and uncertainty over U.S. interest rate cuts eases, market participants are regaining confidence in the Canadian dollar.

However, the Bank of Canada remains cautious about the country’s economic outlook, citing concerns about future consumer spending.

Recent gains in the Canadian dollar have raised hopes of a turnaround, but questions remain about whether the currency’s slide is truly over.

What do the technicians say?

you welcome in Teaching Assistant of the Day (TAOTD)! 👋

Let’s focus on the current technical setup of the USD/CAD pair based on the daily chart:

📈 Technical analysis of the daily chart of the USD/CAD pair

Using the technical analysis concepts we covered in our Forex course, let’s analyze usd/cd.

Simple moving averages:

• 10 period simple moving averageIt is located at the level of 1.3826. The current price is less This level indicates short term. bearish Momentum. The slope is down, indicating recent short-term weakness.
• 50 period simple moving average:Located at 1.3717. The price is a bit high. above This level indicates medium-term bullish momentum. The slope is to the topenhancing strength in the medium term.
• 100 period simple moving averageIt is located at the level of 1.3687. The price is: above This level indicates medium to long term bullish momentum. The slope is to the topindicating sustained strength.
• 200 period simple moving averageLocated at 1.3602. The price is good. above This level indicates long-term bullish strength. The slope is to the topconfirming the long-term uptrend.

Relative position of moving averages:

• Order (top to bottom): 10 SMA > 50 SMA > 100 SMA > 200 SMA
• This alignment is risingindicating that Uptrend In all time frames.
• However, the recent decline in price indicates that it is below the 10-year simple moving average. short term weakness.

random oscillator

• random oscillatorThe current reading is 18 (K) and 39 (D), indicating that the market is in Oversold This indicates that the price may soon face support and may be about to bounce.

🕵️ Key Notes

Price movement:

Let’s focus on the recent price action visible in the USDCAD chart:

1. sharp rise: The price action shows a strong rally from late July to early August, with a series of green candles pushing the price from around 1.3200 to near 1.3900.
2. New height: This rally culminated at a new high on the visible time frame, reaching near 1.3900.
3. Rejection at the peak: Upon reaching this peak, there is a clear rejection with a long upper wick on the candle, indicating that sellers are stepping in at these high levels.
4. Sharp reflection: Immediately after the peak, we see a sharp reversal with a series of red (bearish) candles. This reversal is characterized by candles with long bodies, indicating strong selling pressure.
5. Rapid descent: The decline from the peak was rapid, with the price falling from around 1.3900 to current levels near 1.3740 in a short period.
6. Increased volatility: The size of the last candles, whether bullish or bearish, indicates increased volatility in the pair.
7. Falling below the short-term moving average: During this decline, the price fell below the 10-day simple moving average (SMA), which is usually seen as a short-term bearish signal.
8. Approaching the 50 SMA: The current price action shows that the pair is approaching and testing the 50-day simple moving average, which could act as a potential support level.
9. Potential Oversold Conditions: The rapid nature of the decline suggests that the pair may enter oversold conditions in the short term, which could lead to a bounce or consolidation.
10. Losing recent gains: The current price action has erased a significant portion of the gains made during the rally from late July to early August.

Support and resistance levels:

• Main resistance: around 1.3900 (recent peak)
• immediate resistanceImmediate resistance is located at 1.3826 (10-period simple moving average).
• Instant support: The 50 simple moving average is at 1.3717.
• Potential support: 100 SMA at 1.3687 and 200 SMA at 1.3602

Moving averages:

• The 10-period simple moving average is currently acting as resistance, while the 50-period and 100-period simple moving averages are providing crucial support.

Random oscillator:

• The presence of the Stochastic indicator in the oversold zone indicates a possible bounce or price consolidation.

Market structure, market composition:

• General trend: The market structure is showing a long-term uptrend, characterized by higher lows and higher highs since December 2023.
• Recent swing highs and lowsThe chart shows lows around 1.3600 in late June and highs around 1.3950 in late July, followed by a recent low around 1.3700.
• broken frameA significant price drop occurred in late July when the price broke above its previous swing high in mid-April indicating a continuation of the uptrend.
• Possible change of personality (ChoCh: A sharp reversal from the recent high suggests a potential ChoCh if the price drops below 1.3750.

🤔 Possible trade scenarios

He is USD/CAD Buy or Sell?

The following trading scenarios are provided for educational purposes only. Since they do not include full risk management practices, they are not intended to serve as actual trading recommendations, but rather as food for thought to help you generate your own trading idea.

Long bias:

• Entry pointConsider entering a long position if the price finds support near 1.3717 (50-period simple moving average) or 1.3687 (100-period simple moving average) and shows signs of a bounce, such as a bullish candlestick pattern or positive divergence on the stochastic indicator. Additionally, a break above the resistance level at 1.38264 (10-period simple moving average) could signal a potential recovery.
• Stop lossPlace a stop loss below the support level at 1.3650 to manage the risk.
• GoalWe expect a move towards 1.3900 and above if the uptrend resumes.
• RationaleTargeting the 1.3900 level depends on the previous resistance level, which may act as an important level for taking profits. If the price is able to penetrate this level, this indicates strong upward momentum and the possibility of further rise.

Short bias:

• Entry pointConsider entering a sell position if the price fails to hold the support level at 1.37179 (50-period SMA) and 1.3687 (100-period SMA) and shows signs of bearish momentum, such as a strong bearish candlestick pattern or the Stochastic indicator remains in the oversold zone.
• Stop lossPlace a stop loss above the recent high at 1.3820 to manage risk. This level is crucial as a break above it would invalidate the bearish setup.
• GoalThe initial target could be the support level at 1.3600. If the downward momentum continues, expect further decline towards 1.3500 or lower.
• RationaleTargeting the 1.3600 level initially is due to it being a psychological and historical support level. If the price breaks this level, it will indicate further bearish momentum and the possibility of a further significant decline towards the next support level at 1.3500.

📝 TAOTD Summary

• directionThe long-term trend appears to be bullish with price above the 200-period simple moving average, but the short-term trend is showing significant bearish momentum with price below the 10-period simple moving average.
• Main levelsSupport is at 1.3717 (50-period simple moving average) and 1.3687 (100-period simple moving average) and resistance is at 1.38264 (10-period simple moving average).
• PaidThe Stochastic indicator indicates an oversold condition, indicating a possible short-term recovery or consolidation.
• market structure, market compositionThe latest Bank of England indicator points to a continuation of the upward trend,
• Moving average analysisA downward slope on the 10-period simple moving average indicates strong short-term bearish momentum, while an upward slope on the 50-period, 100-period and 200-period simple moving averages indicates critical support in the medium to long term.

Recent price action indicates short-term weakness. The market is currently at a critical juncture, testing an important moving average support level.

Watch closely to see if this support holds.which could lead to a bounce, or if it breaks, it could indicate the possibility of further decline.

Remember that this analysis is based only on the technical aspects shown on the chart. In real trading scenarios, it is crucial to consider fundamental factors, economic data releases from both the US and Canada, central bank policies, and broader market conditions.