Is it time to Sell USDCAD? Interest Rate ahead
The USDCAD pair has been trending upwards steadily since 24 September, achieving a notable gain of 3.22% without any significant retracement. It is now approaching a key resistance level of 1.3880, the most significant resistance region since 2022.
USDCAD overbought?
The Relative Strength Index (RSI) indicated a reading of 75.53 on 21 October, suggesting a potential overbought condition for USDCAD. The RSI is a widely used indicator in technical analysis, employed to identify possible overbought or oversold scenarios.
Classic Bearish Divergence on H4:
On the 4-hour chart, USDCAD has formed a classic bearish divergence, signalling the potential influx of selling pressure. A classic bearish divergence occurs when the price makes higher highs while the RSI fails to keep pace, forming lower highs.
This is a powerful bearish reversal pattern, particularly relevant following a significant upward movement, as is the case with USDCAD at this time.
Technical Analysis Summary:
From a technical analysis standpoint, we have identified several key factors:
1. A directional upward movement, accumulating 3.22% in USDCAD.
2. The RSI indicates signs of buyer exhaustion on the H4 chart.
3. The presence of a classic bearish divergence on the H4 chart.
These elements collectively support the notion that USDCAD may be in an overbought situation, potentially creating selling opportunities.
Sell trigger with 9-period Moving Average
Recent price action has remained above the 9-period moving average, indicating a slight uptrend in the short term.
However, if the price crosses below the SMA9 on the H4 chart, this could act as a sell trigger, leading to a potential decline towards the 1.3690 region within a few days.
Impact of CAD Interest Rate Decisions:
The Bank of Canada is currently adopting a more dovish stance, gradually lowering interest rates as inflation moves closer to control. This has been evidenced in recent meetings, with a consistent 0.25% cut implemented at each meeting. The next interest rate decision is scheduled for 23 October, with the market anticipating a potential 0.50% cut. However, given that the last three meetings resulted in 0.25% reductions, a 0.50% cut appears unlikely at this stage. If the interest rate cut is smaller than expected, the CAD may appreciate in the short term, which could further contribute to a decline in USD/CAD.
Monitoring Key Developments
In summary, as USDCAD approaches a critical resistance level amid signs of overbought conditions, traders should monitor these technical indicators and market sentiments closely. With potential selling opportunities pending and the influence of interest rate decisions looming, it will be crucial to stay alert to market developments moving forward.
Disclaimer:
74% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Past performance is not necessarily indicative of future results. The value of investments may fall as well as rise and the investor may not get back the amount initially invested. This content is not intended for nor applicable to residents of the UK.
USDCAD overbought?
The Relative Strength Index (RSI) indicated a reading of 75.53 on 21 October, suggesting a potential overbought condition for USDCAD. The RSI is a widely used indicator in technical analysis, employed to identify possible overbought or oversold scenarios.
Classic Bearish Divergence on H4:
On the 4-hour chart, USDCAD has formed a classic bearish divergence, signalling the potential influx of selling pressure. A classic bearish divergence occurs when the price makes higher highs while the RSI fails to keep pace, forming lower highs.
This is a powerful bearish reversal pattern, particularly relevant following a significant upward movement, as is the case with USDCAD at this time.
Technical Analysis Summary:
From a technical analysis standpoint, we have identified several key factors:
1. A directional upward movement, accumulating 3.22% in USDCAD.
2. The RSI indicates signs of buyer exhaustion on the H4 chart.
3. The presence of a classic bearish divergence on the H4 chart.
These elements collectively support the notion that USDCAD may be in an overbought situation, potentially creating selling opportunities.
Sell trigger with 9-period Moving Average
Recent price action has remained above the 9-period moving average, indicating a slight uptrend in the short term.
However, if the price crosses below the SMA9 on the H4 chart, this could act as a sell trigger, leading to a potential decline towards the 1.3690 region within a few days.
Impact of CAD Interest Rate Decisions:
The Bank of Canada is currently adopting a more dovish stance, gradually lowering interest rates as inflation moves closer to control. This has been evidenced in recent meetings, with a consistent 0.25% cut implemented at each meeting. The next interest rate decision is scheduled for 23 October, with the market anticipating a potential 0.50% cut. However, given that the last three meetings resulted in 0.25% reductions, a 0.50% cut appears unlikely at this stage. If the interest rate cut is smaller than expected, the CAD may appreciate in the short term, which could further contribute to a decline in USD/CAD.
Monitoring Key Developments
In summary, as USDCAD approaches a critical resistance level amid signs of overbought conditions, traders should monitor these technical indicators and market sentiments closely. With potential selling opportunities pending and the influence of interest rate decisions looming, it will be crucial to stay alert to market developments moving forward.
Disclaimer:
74% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Past performance is not necessarily indicative of future results. The value of investments may fall as well as rise and the investor may not get back the amount initially invested. This content is not intended for nor applicable to residents of the UK.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.