Talking Points in Canadian Dollar, USD / CAD, CAD / JPY:

  • USD / CAD bounces off major support area after going all of 2021 without testing 1.3000 psychological level.
  • CAD / JPY may be more attractive to bullish CAD buyers, and prices are testing a key support point around the psychological level of 90.00 for this chart.
  • The analysis contained in the article is based on Price action and graphic training. To learn more about price action or chart patterns, check out our DailyFX Education section.

It’s a quick start to the new year, as the US dollar paused higher to start the year, pushing higher from longer-term range support. This helped produce a strong bullish movement in the USD / CAD, just after a major support area came into play.

Two weeks ago, the pair hit a key resistance level of 1.2850. Like I shared at the time, this left the door open for a rise towards resistance at the 1.2950 level which, at the time, performed as the pair’s 2021 high. This level was reached the following Monday (December 20), after which the prices started to reverse.

This means that the USD / CAD has gone through the whole of 2021 without testing the psychological level of 1.3000. But, it also allowed prices to keep falling until support could come into play at 1.2622, which is the 50% marker of the major move from 2002-2007, and it is the same price. who had contributed to established support earlier in December, with a significant rebound after the Bank of Canada rate decision.

Four Hour USD / CAD Price Table

Graphic prepared by James stanley; USDCAD on Tradingview

USD / CAD Breakout Potential

The 2020-2021 massive selloff continues to weigh heavily in USD / CAD. The pair fell over 2,600 pips in a year and a half, eventually building support around the psychological level of 1.2000. The 23.6% Fibonacci retracement of that sale is in the same support area that is currently helping to maintain lows.

But it is the 1.3000 level that remains interesting here, as this price merges with the 38.2% retracement of this major move and the psychological level of 1.3000 was a big point in the pair before the open. from 2021.

This may leave the door open for bullish USD / CAD scenarios, seeking the strength of the USD to maintain a preference over the strength of the CAD.

USD / CAD Weekly Price Table

USDCAD Weekly Price Table

Graphic prepared by James stanley; USDCAD on Tradingview

USD / CAD short term

Looking at the shorter term issue, it looks like the bullish theme needs a bit more work before it is ready to go.

The rebound in major backers has so far been strong and this is encouraging. But, at this point, prices have simply rebounded to the resistance of the previous support, and the 1.2750 level appears to have slowed the tilt. This may pave the way for higher support potential later in the week, looking for a return to the 1.2621-1.2672 area, with a lower higher above the low of 1, 2617 of last week.

Two-hour USD / CAD price table

Two Hour USDCAD Price Table

Graphic prepared by James stanley; USDCAD on Tradingview

CAD / JPY bullish potential

For those looking for CAD strength scenarios, pairing the Canadian currency with something like the Japanese yen may be more promising. As the Fed sees higher rates in 2022, the BoJ does not appear to be on the same wavelength and maintaining a negative rate regime in Japan could help further weaken the Japanese yen. And at this point, the CAD / JPY retains some bullish interest given the recent highs and lows that were printed in the second half of 2021.

On the monthly chart below we can see earlier resistance trend line come back as support to help set monthly lows for November and December. The 38.2% retracement of this move is just above the psychological level of 90.00, which is a key area on the chart.

CAD / JPY Monthly Price Table

CADJPY Monthly Price Table

Graphic prepared by James stanley; CADJPY on Tradingview

CAD / JPY short term

A shorter term review of the pair highlights the importance of the 90-90.24 area for short term bullish scenarios. The uptrend has been pretty one-sided since the low was set on December 20e, with but a pause in the movement as the psychological level of 90.00 has returned to the picture. But after trading above 91.00 on New Years Eve, the pair pulled out and has since found support at the 90.24 Fibonacci level, which was the previous December high.

Four-hour CAD / JPY price chart

Four Hour CADJPY Price Table

Graphic prepared by James stanley; CADJPY on Tradingview

— Written by James stanley, Senior strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

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