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USDCAD's Resilience: Bouncing Back from Lows and Eyeing New Highs


17 November 2023 Written by Feng Zhou  Senior Market Analyst Feng Zhou

The USDCAD currency pair recently encountered a significant setback, momentarily slipping below the crucial 1.3800 threshold. This decline was notably brief, as the pair swiftly regained its composure, finding solid support at the 50-day simple moving average (SMA) and managing to recover some of its earlier losses. This rebound highlights the resilience of the pair in the face of market fluctuations.

Interestingly, momentum indicators are currently pointing towards a cautiously optimistic outlook. This sentiment is underpinned by the pair's performance since July, during which it has been on a consistent upward trajectory. This steady advance culminated in a notable 13-month high of 1.3898 on November 2. Despite encountering two rounds of weakness since this peak, each time the pair faced a downturn, the robust support provided by the ascending 50-day SMA effectively halted these declines.

Looking ahead, if the bullish momentum maintains its course, the pair might initially target the resistance level seen in October at 1.3784. Breaching this resistance could potentially pave the way for a move towards the March peak of 1.3860. Should the pair sustain this upward momentum and overcome the March peak, it might then set its sights on revisiting the 2023 peak of 1.3898, which also stands as a 13-month high.

USDCAD's Resilience: Bouncing Back from Lows and Eyeing New Highs

Conversely, if the pair were to reverse its trajectory and move lower, the recent support level around 1.3653, coinciding with the 50-day SMA, is expected to serve as a crucial defensive barrier. A drop below this key level might lead the pair to test the November low of 1.3628. Should this downward trend persist, the next potential halt could be at the October low of 1.3568.

In summary, the USDCAD pair has been navigating through a period of notable volatility, as evidenced by the expanding Bollinger bands. Despite these fluctuations, the pair's bullish medium-term structure, characterized by a pattern of higher lows, has remained undisturbed. The repeated ability of the 50-day SMA to repel downward movements underlines the resilience and potential upward momentum of the USDCAD in the current market environment.

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