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USDCAD – Technical Outlook


US Gross Domestic Product (GDP) QoQ

Gross Domestic Product (GDP) measures the annualized change in the inflation-adjusted value of all goods and services produced by the economy. It is the broadest measure of economic activity and the primary indicator of the economy’s health. 

The last quarterly GDP increased by 2.9%, beating the forecast of 2.7%. The GDP declined to -1.4% in April and continued the negative trend until September. It recovered in August to 2.6%.

The report is due Thursday, 22 December 2022, at 13:30 GMT.

Technical Analysis Daily Timeframe

Moving Average(MA):

On the Daily timeframe, the USDCAD price is trading both above the 200 and the 50 moving averages, meaning on the higher time, the market is bullish.

Relative Strength Index(RSI):

The RSI line is at 55.98, showing a slightly overbought sentiment. There is no divergence seen on the RSI indicator.

Trading Pattern:

The price formed a head and shoulder pattern that occurs when a market trend reversal is due. In the current scenarios, the market was in a bullish phase and reversed after the formation of head and shoulder pattern.

Analysis using price action:

USDCAD is bullish on the daily time frame. The market made a considerable bull run from 9th Sept till 26th Sept 2022, scaling up 6.82%, accumulating a total volume of 254k, and gaining 883 pips. The market formed a head and shoulder pattern. The high swing formation was at $1.38372. After that, the market went into a correction phase and started the swing low at $1.35029. This high and low was the left shoulder of the pattern.

The next bullish move formed the swing high at $1.39775 and its swing low at $1.34955. Accumulating some bulls again, the market could not break the previous high and instead formed a new lower high at $1.38081 and a low at $1.33873. Here the market also successfully broke the neckline formed at $1.35160.

After the neckline break, the market pushed down to a new recent swing low at $1.32259; however, the bulls did not allow the price to fall much down and pushed it up, forming a new swing high at $1.34950. 

Currently, the price has been trading inside a bullish trend line making higher highs and higher lows, accumulating more buyers than sellers. The price is also above the head and shoulder pattern broken neckline, meaning the sellers could not keep buyers away. Moreover, the price is near a significant resistance zone; if it breaks it, it may trade further up.

Potential pivot points using Price Action:

Resistance PivotSupport Pivot

This considerable resistance and support level can enter or exit when approaching future market openings.

Key Trading Recommendation

Although GDP has increased since the last quarter, it’s still not a significant rise and is overall still negative.

Traders should avoid entering positions during these news events since the market will have higher-than-average volatility, meaning that currencies could move in either direction without a definite trend for a short while.

Vantage does not represent or warrant that the material provided here is accurate, current, or complete, and therefore should not be relied upon as such. The information provided here, whether from a third party or not, is not to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any financial instruments; or to participate in any specific trading strategy. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. We advise any readers of this content to seek their own advice. Without the approval of Vantage, reproduction or redistribution of this information is not permitted.

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