USD/CAD Triple Bottom Supports Loonie – Brace for a Breakout!

The USD/CAD is trading sideways over the support area of 1.2814 level. This support level is extended by a triple bottom pattern on the 2..

Arslan Butt•Tuesday, December 29, 2020•2 min read

The USD/CAD pair closed at 1.28461, after placing a high of 1.28758, and a low of 1.28134. The USD/CAD pair remained mostly in negative territory throughout the trading session on Monday, but reversed, regaining some of its losses in the late American session. Earlier in the day, the risk-on market environment helped to keep the crude oil prices higher and supported the commodity-linked currency, the Loonie, ultimately weighing on the USD/CAD pair. The price per West Texas Intermediate (WTI) barrel rose to $ 48.95, supporting the downward momentum of the USD/CAD pair.

The losses in the USD/CAD pair could also be attributed to the weakness of the greenback on Monday, as the US Dollar Index fell below the 90 level. The USD came under pressure on Monday, after US President Donald Trump signed the long-awaited second round of the stimulus package on Sunday.

The $ 2.3 trillion stimulus package became law after Donald Trump signed the bill that includes $ 900 billion for pandemic aid and $ 1.4 trillion for government funding. More aid to the general public means more inflation, ultimately decreasing the value of the US dollar and weighing on the USD/CAD pair. Meanwhile, the losses in the USD/CAD pair were limited in the late trading session on Monday, after the WTI Crude Oil prices reversed their direction, along with the US dollar, which started to rebound. The US Dollar Index was pushed higher, to above the 90 level, in the late trading hours on Monday. The rise in the greenback was supported by the increased safe-haven appeal, driven by the rising number of coronavirus cases globally. The new variant of COVID-19, which was originally identified in the UK, is reported to have reached eight countries in the European Union, as well as Canada and Japan.

The report suggesting the spread of a new variant of the coronavirus across the world raised the fears of economic recovery and supported the safe-haven greenback, ultimately capping any further downside momentum in the USD/CAD pair on Monday.

With the rebound in the US dollar, the WTI Crude Oil prices also suffered, as they are negatively correlated. The rising fears of the increased spread of the coronavirus also raised concerns over another nationwide lockdown in countries worldwide, which could ultimately affect the energy demand. The sudden fall in crude oil prices added weight to the commodity-linked Loonie prices, which positively impacted the USD/CAD pair in the late American trading hours.

Daily Technical Levels

Support Resistance

1.2812 1.2878

1.2780 1.2910

1.2747 1.2943

Pivot Point: 1.2845

The USD/CAD is trading sideways over the support area of 1.2814. This support level is extended by a triple bottom pattern on the 2-hour timeframe. The leading indicators suggest selling, but it will only be worth it if the USD/CAD breaks below the 1.2814 level. Let’s wait for a breakout. Good luck!

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ABOUT THE AUTHOR See More

Arslan Butt

Index & Commodity Analyst

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.