The current price of the USD/CAD exchange rate is 1.2621 (April 07, 2021). This pair has slightly corrected its longer-term declining trend in recent months. The Canadian Dollar is a commodity currency and the rising price of oil may be one of the main reasons for the long downward trend. Let’s look at statistical and technical analyzes.
Based on a long-term analysis of historical data, the average positive and negative daily returns are approximately 0.41% and -0.41%, respectively. Yesterday´s return was only 0.33%. Our scoring is currently negative (-1) for the month-on-month change and 0 for price indexation. This means that we are in a slightly negative phase of the cycle. Both scorings range from -3 up to 3. The estimated cycles development based on our analytical systems is shown in the following chart.
Different moving averages (MAs) help us better identify trends across multiple time frames. We use 3 basic MAs to find out which sentiment dominates each horizon. The purple line represents the monthly, the green line the 6 months and the yellow line the annual moving average. According to the monthly MA, USD/CAD is in bullish sentiment, after rising above it. As we can see in the chart below, the 6 months and annual MAs are still in bearish sentiment. In the case of growth, a 6-month MA can be an important resistance for the exchange rate.
There have been more downward trends since the COVID-19 outbreak. At the beginning of this year, however, a medium-term maximum of 5 consecutive days was reached. Upward trends did not exceed more than 3 days in the same period. The maximum in the measured period is 7 days. We could use the average ATR (Average True Range) obtained from daily data (0.80%) to estimate Stop Loss orders for our positions. The current value is 0.58%. Approximately 90% confidence interval (return between -0.9% and 0.9%) is shown in the histogram below by a red rectangle.
We could use the last decile of low to high returns (1.40%) to estimate Profit Targets, as shown in the chart below.
Basic technical analysis still supports bearish sentiment, as the exchange rate creates lower highs and lower lows. Short-term MA could be the first resistance for this pair. However, we can clearly see the divergence between the market price and the RSI. The USD/CAD is currently also close to the supply zone (red rectangle) with a strong upper part, where the Fibonacci retracement level of 23.60% is. In addition, a psychological level of 1.3000 is above this zone, along with a longer-term MA. This could be an important level of resistance for bulls.