USD/CAD Forecast: Turned To The Downside As 1.2763 Resistance Holds

Our USD/CAD forecast sees the pair dropping aggressively in the last hours reaching the 1.2667 level. Still, the sell-off could be only a temporary one. The pair plunged as the Dollar Index registered a strong sell-off as well, weakening the greenback. The DXY invalidated a larger downside movement, so temporary declines could help us to catch new USD longs.

Technically, the currency pair is into a corrective phase after reaching the 1.2949 major resistance level. The price action signaled that the downside movement could be over, but we still have to wait for confirmation before considering going long.

Fundamentally, the Canadian Manufacturing PMI was reported at 56.5 points below 57.2 points in the previous reporting period. Furthermore, the RMPI and the IPPI indicators reported worse than expected figures today.

On the other hand, the USD has taken a hit from the US data earlier, that’s why the USD crashed in the short term. The ISM Manufacturing PMI dropped from 61.1 points to 58.7 points far below 60.0 expected signaling a slowdown in expansion, while the JOLTS Job Openings was reported at 10.56M versus 11.06M estimates.

In addition, the ISM Manufacturing Prices reported worse than expected data as well, which was bad for the USD. Still, don’t forget that the USD’s depreciation could be only a temporary one, the FED is expected to hike its rate during year, which is bullish for the USD.

USD/CAD Forecast: Price Technical Analysis – Downtrend Line

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The USD/CAD pair dropped after testing and retesting the downtrend line, after registering only false breakouts above this upside obstacle. Also, it has failed to close and stabilize above the 1.2763 level signaling strong selling pressure. 

Now, it challenges the weekly pivot point of 1.2702 and the 38.2% retracement level. Stabilizing below these downside obstacles may signal more declines. Actually, in the short term, the bias is bearish as long as it stays under the downtrend line.

Only a valid breakout above the downtrend line could announce that the downside movement is over.