The price of WTI Crude Oil soared to $79.50 per barrel last week – a level not seen since November 2014. That move fundamentally supported the Canadian dollar, which was one of the strongest major currencies in the foreign exchange market. USD/CAD dropped -1.39%, charting the third downward weekly candlestick in a row and signalling a new wave of the bearish momentum that started back in March 2020.
The weekly chart setup shows several bearish factors from a technical analysis point of view. USD/CAD delivered two sell-signals in August and September this year when the weekly close rate failed to enter inside the Ichimoku cloud (see two red arrows on the chart below). Both bearish signs resulted in 300 pip moves (four-digit quotes). The latest weekly candlestick closed below the Ichimoku base line that acted as the support curve previously. The leading span is consistently bearish, although the negative surplus has narrowed after the bullish retracement towards the resistance range of 1.2750/2800. The ADX and DI indicator reflect bearish sentiment, while the mainline bounced off the zero level, pointing to growing bearish momentum.
Another weekly chart below signals bearish continuation rather than a reversal scenario. The Williams Alligator indicator has not completed the bearish reversal pattern yet as the three lines aren’t placed in a bearish order. However, USD/CAD breached the lower line according to the weekly close rate, which points to strong selling pressure. The Standard Deviation does not show extreme values yet, which leaves room for further decline in the pair. The horizontal static line placed at 1.20677 is a long-term target for the bears.
The daily timeframe is also bearish given the recent decline (as depicted in the chart below). The 250 day exponential moving average turned South and acted as the resistance curve, limiting the bullish whipsaw on October 6th. The MACD indicator has a growing histogram in red, while both lines went into negative territory with no visible divergences. The RSI oscillator is well below the 50% level, while its value is still far from extremely oversold conditions. As a result, the bears could easily keep pushing the rate towards the green median line that used to be the upper line of the bearish channel in December 2020 – June 2021. So we could reasonably expect USD/CAD at around 1.2200/2150 by the end of the week. If Oil also continues to rise, the drop in USD/CAD could accelerate even faster. Best wishes traders!!