By: Mike Kulej
Just like many other major currencies, the Canadian Dollar has been getting stronger against the US Dollar. In case of the USD-CAD, however, the recent price action has been much smoother than in other pairs, particularly when we look at the daily chart.
On this time frame, we can see the USD-CAD move gradually down, about 1000 pips since last August. There have been periodical corrections, but none of them was large, 300 pips or so, making for a well defined, if slow trend.
At present, this chart displays a consolidation of sorts. A strong resistance formed at 0.9975, just under the 100 SMA. If both of these levels are broken, we could see a bigger correction here, perhaps even a reversal. The MACD is in agreement with this scenario, because it is forming a possible divergence.
Looking Lower
On the lower end of this consolidation is a support at 0.9665. The price is slowly heading lower and could test it soon. Moving under this level would preserve the downtrend. This possibility is confirmed by the ADX, which is rising, indicating a strengthening downtrend.
Since the technical indicators contradict each other, it is probably best to wait for the price itself to show where it “wants” to go. A daily close above the resistance, or below the support will likely be more indicative of the USD-CAD next direction than other analysis.