USDCAD Analysis May 2016 (W,M)
Created on Sunday, 01 May 2016 00:38
Written by Austin Galt
The USDCAD has continued to head south while I continue to believe a bear rally is set to begin imminently. Let’s look at the bigger picture using the weekly and monthly charts.
USDCAD WEEKLY CHART
The horizontal line denotes the previous swing low which price has now broken so a lower low is in place or will be shortly.
The Fibonacci Fan shows price is currently around support from the 38.2% angle and I am looking for a bear rally that gets back up to the 23.6% angle and perhaps a touch above.
I have added Fibonacci retracement levels of the move down. Keep in mind the low may not yet be in place but I expect only marginally lower and not enough to seriously affect this analysis. I favour a bear rally back up to the 61.8% level at $1.3860.
The RSI is oversold so a rally should be on the cards shortly. This indicator has made a new low so is unlikely to be the final low as that often occurs with bullish divergences.
The MACD indicator is bearish but a relief rally looks in order.
USDCAD MONTHLY CHART
The Bollinger Bands show the recent high traded well above the upper band which is a common occurrence found at solid tops. Price is currently below the middle band but I favour price to trade back above it before the downtrend resumes.
I have drawn a Fibonacci Fan from the 2002 high to 2007 low which has shown some very nice price symmetry. The 2009 high was at resistance from the 61.8% angle while the recent high was around resistance from the 88.6% angle. Perhaps this move down will put in a major low around the 76.4% angle. Let’s see.
I have added Fibonacci retracement levels of te move from the 2007 low to 2016 high. Personally, I favour the next major low to be around the 61.8% level which stands at $1.1219.
The RSI is weak while the MACD has just turned bearish so it appears likely that this move down won’t end for many months.
Summing up, I expect a bear rally is imminent. After that, price should head back down to new lows.