CADUSD dominated by bears dragging the market lower throughout the day
Canadian Dollar/US Dollar (CADUSD) Technical Analysis Report for Sep 21, 2020 | by Techniquant Editorial Team
Moving lower for the 2nd day in a row, CADUSD ended Monday at 0.7516 tanking 57 pips (-0.75%). Today's close at 0.7516 marks the lowest recorded closing price since August 10th. The bears were in full control today, moving the market lower throughout the whole session. Closing below Friday's low at 0.7570, the pair confirmed its breakout through the prior session low after trading up to 62 pips below it intraday.
Daily Candlestick Chart (CADUSD as at Sep 21, 2020):
Monday's trading range has been 84 pips (1.11%), that's far above the last trading month's daily average range of 50 pips. Weekly volatility is also higher, being slightly above the market's average weekly trading range. The longer-term, monthly volatility is currently slightly lower than usual for CADUSD.
One bearish candlestick pattern matches today's price action, the Black Candle.
Prices are trading close to the key technical support level at 0.7490 (S1). The FX pair closed below the 50-day moving average at 0.7535 for the first time since May 15th.
Crossing below the lower Bollinger Band for the first time since March 19th, prices have shown unusually strong downward momentum in the short-term. This could either indicate a potential selling climax after which prices might head back up towards the mean of the Bollinger Bands at 0.7606 or signal the beginning of a strong momentum breakout leading to even lower prices. The last time prices broke out below the lower Bollinger Band on March 16th, CADUSD lost -1.32% on the following trading day.
While the market is currently in a short-term downtrend, this could just be a correction, as both the medium and long-term trends are still bullish.
Further selling might move prices lower should the market test August's close-by low at 0.7434.
Among the 12 market conditions that our pattern recognition engine identified today, the statistics for the Technical Indicators based market condition "Close crossed below the lower Bollinger Band" stand out. Its common bearish interpretation has been confirmed for CAD/USD. Out of 80 times, CADUSD closed lower 53.75% of the time on the next trading day after the market condition occurred. The optimal exit for swing trading this condition on the short side has been after 10 trading days, showing a win rate of 61.25% with an average market move of -0.38%.