Some basic information about the USD/CAD
The USD/CAD is the parity showing the exchange rate between the American Dollar and the Canadian Dollar. Its rate corresponds to the value of a US dollar in Canadian dollars. On Forex or by surfing on specialized forums, you will hear about this currency pair under the name of Loonie.
The Loonie currency pair is still an important cross on the Forex market as it accounts for nearly 5% of all transactions made annually. It is therefore the sixth most traded currency pair in the world. In addition, the USD/CAD has the distinction of having high volatility, which can be beneficial to traders in the short to medium term but should be approached with caution.
Generally speaking, the USD/CAD is quoted to 4 decimal places. As with most other currency pairs, it is mainly the phenomena of supply and demand that justify its upward or downward movement. The price of this asset is therefore what is commonly referred to as a "floating" price.
If we already know that the organization responsible for regulating the greenback is the Fed or U.S. Federal Reserve, for the Canadian dollar, it is the CAD, or Canadian Central Bank that is responsible. However, the interventions of these two financial organizations on the Forex to manipulate the evolution of prices remain very rare.
Historically, the USD/CAD cross has moved downwards since its inception with an all-time low of 0.9058 and a record high of 1.6188 points.
Technical analysis on USD/CAD
We will now take a closer look at the technical analysis of the USD/CAD currency pair. This type of analysis differs greatly from fundamental analysis because it is not about analyzing events but only about studying charts from a mathematical and statistical point of view in order to detect specific movements and patterns suggesting that a trend will or will not accelerate or reverse.
As you will have understood, this type of analysis is not for beginners and requires a certain knowledge and experience. It is about using technical and graphical indicators to evaluate the direction of the trend, its strength, the volatility of the market and its liquidity.
There are many indicators suitable for USD/CAD analysis such as Bollinger Bands, MACD, moving averages, Fibonacci lines, pivot points and support and resistance levels.
Here, the technical analysis does not require that you are able to calculate these indicators by yourself because the majority of the charts proposed by the brokers and the sites of stock exchange information on line already make it possible to display them such as it is directly on the curves. It will be necessary however to know each of these indicators and what they mean if you want to make a correct and coherent interpretation.
It should also be noted that technical analysis also requires the ability to manipulate charts, whether by displaying the most relevant indicators or by customizing the time units of the latter. Depending on the trading horizon and the strategy chosen for the USD/CAD, the periodicity chosen will indeed vary in order to carry out an analysis sticking to the period studied.
Technical analysis is an essential analysis before any decision is taken on the foreign exchange market and must therefore be carried out with the utmost care. It must of course also be systematically coupled with a fundamental analysis.