Good day, dear traders!
Before proceeding to the charts of the USD/CAD currency pair, let me tell you some interesting facts about the balance of the Fed. As you know, the COVID-19 epidemic and its negative consequences for the American economy forced the Chairman of the Federal Reserve System (FRS) Jerome Powell to start a large-scale injection of liquidity, for which the printing press was launched at the maximum capacity. As a result, the Federal Reserve’s balance sheet has almost doubled over the past six months, from $ 4 trillion to $ 7 trillion. An unprecedented number!
However, recently, bond purchases have fallen to the region of six billion dollars a month, while the March figure for purchases of mortgage and Treasury bonds was 120 billion. However, experts suggest that this is a temporary measure and soon the US Central Bank will have to evade the volume of the quantitative easing program. Well, we’ll wait and see. And today, at 13:30 (London time), reports on retail sales will be received from Canada. The forecasts are disappointing. The March figure is expected to be minus 10%, and retail sales excluding cars are expected to be minus 5%.
In the meantime, the US dollar paired with its Canadian namesake feels quite confident and is rapidly reducing the losses incurred during the current weekly trading. The current weekly candle has a fairly long lower shadow, which indicates the weakness of the bears and the inability to continue the pressure on the price.
If the bulls manage to raise the exchange rate to the opening price of 1.4093, and even more so to move into positive territory, next week we can reasonably expect continued strengthening of the exchange rate. The breakout of sellers’ resistance at 1.4172, the break of the Tenkan line (1.4203) of the Ichimoku indicator, and the mandatory passage of strong resistance around 1.4264 will finally convince the bulls of the strength of USD/CAD.
The bearish scenario will regain its relevance after breaking the strong support level of 1.3850. At the moment, as we can see, the “Canadian” is trading around the middle of the range of 1.4172-1.3850 and even a little closer to its upper border.
On the daily chart, the pair failed to gain a foothold under the lower border of the Ichimoku cloud and closed yesterday’s trading within it. Today, at the end of this article, USD/CAD shows an impressive strengthening and is trading above the most important psychological level of 1.4000. However, next, the bulls on the instrument will face the Kijun line (1.4056) and the 50 simple moving average, which runs at 1.4086. In case of passing these barriers, for further growth, you need to go up from the Ichimoku cloud, and then break through the resistance at 1.4139 and 1.4172. Judging by the current price dynamics, it is unlikely that the pair will lose all of today’s growth and finish trading under the lower border of the cloud. Statistics from Canada on retail sales are quite capable of influencing the course of trading in USD/CAD, but not to the extent that it turns everything upside down.
An interesting picture is observed on the hourly timeframe. After forming the “Triple bottom” technical analysis reversal pattern, the pair broke through the red neckline and headed up. According to the classic scheme, in such cases, we wait for a pullback to the broken neckline and open purchases. However, the rise was strong, and the quote went much higher, so I would not expect a pullback to the broken red neckline. I believe that a corrective pullback to the price zone of 1.4015-1.4000 will be sufficient reason to open long positions on USD/CAD.
Sales will become relevant if reversal candle patterns appear on the hourly or 4-hour charts at the peak of growth. In this case, you can try shorting, but with small goals, solely based on the correction. At the moment, the USD/CAD pair is clearly bullish.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.