The symmetrical triangle pattern in the zone of EMA 200 was the trigger for the strong upward momentum of the USD/CAD pair. Since the formation of this pattern, the pair had been accumulating volume and then shot up to the highs of almost four weeks around 1.2630 which the top of the bullish channel.
A sharp drop in crude oil prices towards the area of $65.00 per barrel undermined the strength of the Canadian dollar, and the pair rose towards the resistance level of 1.2630. In addition to this, the strength of the US dollar contributed to the increased pressure on CAD.
According to the 4-hour chart, the USD/CAD pair is trading within an uptrend channel. It has also reached the top of the channel which is a sign that the pair is facing resistance and there could be a correction towards the lower line of the channel in the next few hours.
If USD/CAD breaks through the 1.2630 level and consolidates above it, it will be a sign of continuation of the bullish force, and it could rise towards the strong resistance of 1.2695, or the 8/8 of murray. This level will give a good opportunity to sell.
On the contrary, if the Canadian dollar makes a technical correction below 1.2630, it could be a good selling opportunity with the target at 1.2526 where the SMA of 21 and the EMA of 200 are located.
Market sentiment for the loonie continues to be bearish. This correction could give the market an opportunity to sell at these current resistance levels with the target at the 1.2500 psychological level.
The key to trading today and tomorrow is to sell below 1.2630 because the pair is moving in an uptrend. Now it is time for a technical correction and due to the strong resistance at 1.2630 we believe that now is the turn from falling towards the support zone of the trend channel around 1.2536 (S3).
Support and Resistance Levels for August 17 - 18, 2021
Resistance (3) 1.2748
Resistance (2) 1.2671
Resistance (1) 1.2630
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Support (1) 1.2598
Support (2) 1.2571
Support (3) 1.2536
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Trading tip for USD/CAD for August 17 - 18, 2021
Sell below 1.2630 (strong resistance), with take profit at 1.2571 (S2) and 1.2536 (EMA 200), stop loss above 1.2675.