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USD/CAD statistical and technical analysis

The current price of the USD/CAD exchange rate is 1.2060 (May 25, 2021). This pair continues to fall sharply after our last analysis on April 30. It tests an important medium to long-term psychological level, which has acted as a strong support in the last 6 years. Let us therefore look at statistical and technical analyzes.

Based on a long-term analysis of historical data, the average positive and negative daily returns are approximately 0.41% and -0.41% , respectively. The estimated daily return in both directions based on their probability of occurrence is 0.20% and -0.20% . YesterdayΒ΄s return was only -0.14% . Our scoring is currently very positive (3 ) for the month-on-month change and 3 for price indexation. This means that we are in a very positive phase of the cycle according to both scorings that range from -3 up to 3 . The development of the estimated cycles based on our analytical systems is shown in the following chart.

USD/CAD price indexation Source: WALFIR

Different moving averages (MAs) help us better identify trends across multiple time frames. We use 3 basic MAs to find out which sentiment dominates each horizon. The purple line represents the monthly , the green line the 6 months and the yellow line the annual moving average. According to all MAs, USD/CAD is in a bearish sentiment because it is below all of them. In the case of growth, the monthly MA could be the first important resistance for the exchange rate.

USD/CAD daily price development Source: WALFIR

There have been more downward trends since the outbreak of COVID-19 pandemic. At the beginning of this year, the medium-term maximum of 5 consecutive days was reached. Upward trends did not exceed more than 3 days in the same period. The maximum in the measured period is 7 days. We could use the average long-term ATR (Average True Range) obtained from daily data (0.71% ) to estimate Stop Loss orders for our positions. The current value is 0.42% . Approximately 90% confidence interval (return between -0.9% and 0.9% ) is shown in the histogram below by a red rectangle.

USD/CAD daily return distribution Source: WALFIR

We could use the last decile of low to high returns (1.40% ) to estimate Profit Targets, as shown in the chart below.

USD/CAD daily low to high distribution Source: WALFIR

Basic technical analysis still supports bearish sentiment as the exchange rate creates lower lows and lower highs. However, we clearly see the divergence between the market price and the RSI. USD/CAD is also currently approaching a very important psychological level of 1.2000 . In addition, the volumes were higher on positive days (highlighted in red ellipses). Short-term MA could be the first resistance if the bulls pushed the price higher. Another could be the supply zone (red rectangle), where is also the Fibonacci retracement level of 23.60% and the psychological level of 1.2600 . In the case of a further drop below 1.2000 , we could see a dynamic movement or the creation in the form of a bear trap.

USD/CAD basic technical analysis Source: TradingView

WALFIR Technologies is one of the three divisions of WALFIR s.r.o., which is based in Slovakia. The primary interests of this division are analytical, quantitative, and algorithmic...

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