Fireworks likely later this week for USD/CAD

Given the lack of major data releases early this week, global markets are starting off on a quiet note. The U.S. dollar is mixed as we go to press, with the greenback rising against the euro (CME:E6M14), yen (CME:JYM14), Swiss franc (CME:S6M14), and New Zealand dollar (CME:N6M14), but falling against the pound (CME:B6M14), Canadian dollar (CME:CDM14), and Australian dollar (CME:A6M14). Meanwhile, global stock markets are broadly down, though up from their worst levels of the session, and U.S. 10-year bond yields are essentially unchanged near 10-month lows at 2.52%.

On the bright side, volatility is expected to pick up with some relatively important data scheduled for release in the back half of the week, especially out of North America. Taking a look at the USD/CAD daily chart, rates are continuing to consolidate below the 1.0900 handle, as they did throughout most of last week.

More broadly, the pair appears to be nearing the breaking point of a multi-month falling wedge pattern off the 1.1277 high. As a reminder, falling wedges are typically seen as bullish patterns, though it’s generally considered prudent to wait for a confirmed breakout above the upper trend line before trading the pattern.

Beyond the falling wedge pattern, the technical picture is somewhat mixed. The pair did put in a nice two-candle reversal last week off longer-term 38.2% Fibonacci support at 1.0860, showing previous buying support in the mid-1.0800s, but the RSI remains in a clear downtrend. Traders may want to wait for a confirmed breakout in that indicator before turning bullish on the underlying currency pair.


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