FX.co ★ USD/CAD Technical Analysis and Trading Tips on May 6, 2022

USD/CAD has been trying to fully restore the long-term trend since June 2021, strengthening from lows near 1.2000. At the time of writing, the pair is trading near the important resistance level of 1.2845 (200 EMA on the weekly chart). The breakout of this level will take the pair into a long-term bull market.

However, not everything is so clear. The Canadian dollar is a worthy competitor to the US dollar. The monetary policy parameters of the Bank of Canada run almost in parallel with the monetary policy parameters of the Fed. At the same time, inflation in Canada is still less than in the US, and rising oil prices provide strong support for the Canadian currency quotes.

Very strong arguments are needed for the breakout and growth above the resistance level of 1.2845. If this breakout nevertheless takes place, then the nearest growth targets will be the local resistance levels of 1.2875, 1.2900, 1.2960 (2021 top).

In an alternative scenario, the signal to sell is on the break of the important short-term support level 1.2791 (200 EMA on the 1-hour chart). In this case, USD/CAD will head inside the descending channel on the weekly chart. Its lower limit is below 1.2400 (local support level). A more distant downside target is at support at 1.2165 (50% Fibonacci retracement in USD/CAD surge from 0.9700 to 1.4600) and close to 1.2000 (2021 bottom).

Support levels: 1.2791, 1.2740, 1.2694, 1.2650, 1.2540, 1.2460, 1.2400, 1.2290, 1.2165, 1.2010, 1.2000

Resistance levels: 1.2845, 1.2875, 1.2900, 1.2960, 1.3000, 1.3100

Trading tips

Sell Stop 1.2780. Stop-Loss 1.2880. Take-Profit 1.2740, 1.2694, 1.2650, 1.2540, 1.2460, 1.2400, 1.2290, 1.2165, 1.2010, 1.2000

Buy Stop 1.2880. Stop-Loss 1.2780. Take-Profit 1.2900, 1.2960, 1.3000, 1.3100