After Tuesday’s close above resistance at 1.1984, the medium- and long-term uptrends in USD/CAD have gained significant momentum, according to George Davis, Chief FIC Technical Analyst at RBC Capital Markets.
This was even before this week’s surprise 25bp cut from the Bank of Canada, which Davis says allowed the pair to pierce subsequent resistance levels at 1.2200 (76.4% retracement of the 2009-11 selloff) and 1.2265 with ease. The next significant resistance levels are located at 1.2503 and 1.2713, both highs from April 2009. Above there, the focus will turn to the 2009 cycle high at 1.3063.
The 1.2265 and 1.2200 levels now serve as support, followed by 1.1984. Despite the overbought nature of the market, Davis says prices will have to return below 1.1984 to present signs of exhaustion. His medium-term technical target at 1.2250 was reached in a matter of hours, with 1.2500 serving as his new target.