USD/CAD Continues Test of Parity
04/27/2010 12:01 am EST
Following a second test of parity, the USD/CAD has begun to consolidate near the major psychological level. Hawkish comments from the BoC lead to the recent Canadian dollar support, with strong risk appetite also a supportive factor. However, concerns that risk sentiment could shift, as well as the potential for the FOMC to take steps toward tightening at this week’s policy meeting, have limited follow through. Therefore, with the looming event risk and lack of conviction from broader trends, the pair could continue to consolidate, making it an ideal scalping target.
Key Technical Levels
The 20-day SMA at 1.0050 has been a source of resistance, and its convergence with parity could generate further consolidation. Additionally, the technical level may limit upside risks for high-frequency traders. The USD/CAD has started to settle into a tight range between 0.9970- 1.0010, which offers solid levels for scalpers to target.
The USD/CAD has seen its Bollinger Band width narrow as the pair continues to trade near parity. At 288 pips, the variation is near the bottom of the most traded pairs, making it a solid scalping target. However, the pair has seen a few buyers of daily volatility, which saw the ATR briefly spike higher. Daily volatility appears to have quieted again, decreasing to 87 pips, which increases its attractiveness as a potential target.
By John Rivera of DailyFX.com
DailyFX provides forex news on the economic reports and political events that influence the currency market.