November 30, 2023

Canadian Dollar Technical Analysis: USD/CAD, CAD/JPY

Canadian Dollar, USD/CAD, CAD/JPY Talking Points:

  • USD/CAD is bouncing from a major support zone after going all of 2021 without a test of the 1.3000 psychological level.
  • CAD/JPY may be more attractive for CAD-bulls, and prices are testing a key spot of support around the 90.00 psychological level for that theme.
  • The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.

It’s a fast start to the New Year as the US Dollar has put in a topside break to start the year, pushing higher from longer-term range support. This has helped to produce a strong bullish move in USD/CAD, just after a major support zone had come back into play.

Two weeks ago, the pair had pushed up to a key resistance level of 1.2850. As I had shared at the time, this kept the door open for a move up to resistance at the 1.2950 level which, at the time, had functioned as the 2021 high in the pair. That level was hit on the following Monday (Dec 20) after which prices then started to reverse.

This means that USD/CAD went the entirety of 2021 without testing the psychological 1.3000 level. But, it also allowed for prices to continue pulling back until support could come into play at 1.2622, which is the 50% marker of the 2002-2007 major move, and this is the same price that had helped to set support earlier in December, with a major bounce developing after the Bank of Canada rate decision.

USD/CAD Four-Hour Price Chart

USDCAD four hour price chart

Chart prepared by James Stanley; USDCAD on Tradingview

USD/CAD Breakout Potential

The 2020-2021 sell-off continues to loom large in USD/CAD. The pair fell by more than 2,600 pips in a year-and-a-half, until finally building in support around the 1.2000 psychological level. The 23.6% Fibonacci retracement from that sell-off is in the same zone of support that’s currently helping to hold the lows.

But, it’s the 1.3000 level that remains of interest here, as that price is confluent with the 38.2% retracement of that major move and the psychological level of 1.3000 was a big spot in the pair ahead of the 2021 open.

This can keep the door open for bullish scenarios in USD/CAD, looking for USD-strength to retain a preference over CAD-strength.

USD/CAD Weekly Price Chart

USDCAD weekly price chart

Chart prepared by James Stanley; USDCAD on Tradingview

USD/CAD Shorter-Term

Taking a shorter-term look at the matter and it would seem that the bullish theme needs a bit more work before it might be ready to go.

The bounce from key support has so far been strong and that’s encouraging. But, prices at this point have merely bounced up to resistance at prior support, and the 1.2750 level seems to have slowed the incline. This can set the stage for higher-low support potential later in the week, looking for a push back towards the 1.2621-1.2672 zone, with a higher-low above last week’s 1.2617 low print.

USD/CAD Two-Hour Price Chart

USDCAD two hour price chart

Chart prepared by James Stanley; USDCAD on Tradingview

CAD/JPY Bullish Potential

For those looking for scenarios of CAD-strength, meshing up the Canadian currency with something like the Japanese Yen may be more promising. While the Fed is looking at higher rates in 2022, the BoJ doesn’t seem to be on a similar page and the continued negative rate regime in Japan could help to continue weakening the Japanese Yen. And at this point, CAD/JPY retains some bullish interest given the recent higher-high and higher-low that printed in the second half of 2021 trade.

From the monthly chart below, we can see a prior resistance trendline coming back in as support to help set the monthly lows for November and December. The 38.2% retracement of that move plots just above the 90.00 psychological level, which is a key zone on the chart.

CAD/JPY Monthly Price Chart

CADJPY monthly price chart

Chart prepared by James Stanley; CADJPY on Tradingview

CAD/JPY Shorter-Term

Taking a shorter-term look at the pair highlights the importance of the 90-90.24 zone for near-term bullish scenarios. The bullish run has been fairly one-sided since the low was set on December 20th, with but a pause in the move as the 90.00 psychological level came back into the picture. But after trading above 91.00 on New Year’s Eve, the pair has pulled back and since found support at the Fibonacci level of 90.24, which was the prior December swing-high.

CAD/JPY Four-Hour Price Chart

CADJPY four hour price chart

Chart prepared by James Stanley; CADJPY on Tradingview

— Written by James Stanley, Senior Strategist for

Contact and follow James on Twitter: @JStanleyFX

Source link