Introduction

I find it useful to look at the big picture from time to time. In technical analysis terms, that usually means inspection of weekly and/or monthly charts. However, I rarely get to see analysis of "ultra-high" timeframe charts, so I decided to make a couple of attempts of my own. Previously, I analysed long term charts of the Euro, the Yen, the Cable and the Swissie.

Today I'll have a look at yearly and quarterly Loonie charts that are covering the period from 1971 to 2015. While the yearly may be of some use for a quick overview of price action, the quarterly chart offers more detail and makes trends, ranges and patterns more easily observable. I will be focusing on the latter for my analysis.

Yearly Chart


Quarterly Chart


Broken Trendline

One of the first things that I noticed on the chart is the upward sloping channel that the pair traded in from 1971 to 2003. The channel bottom (trendline) was broken in 2004 and has been acting as a resistance since. It capped the pair in 2008 and 2009 and I expect it to continue to play that role, should the pair meet it in the future. The trendline is currently centered around 1.3750.

Fibonacci Retracements

I removed the first three retracement levels (23.6%, 38.2%, 50.0%) because they were already broken during 2008 rally and were just making the chart more complex than it needs to be. 61.8% level was respected really well recently - the pair came less than five pips close to the level before it fell six cents. However, these levels should be looked at as zones, especially on such high timeframes, and it was also selling into 1.35 big figure level that contributed to the turn of the sentiment.

76.4% level works well in a range-bound environment, which the entire 1971 - 2015 price action is. The level roughly coincides with 1986 and 1995 highs, 2000 low and 1.45 big figure level. Which makes 1.43 - 1.45 zone a good candidate for a resistance.

Historical S/R Zones

There are several historical S/R zones on the chart that drew my attention. The first is the parity buffer, which spans from 0.90 to 1.00, though most of the historical price action in that buffer is concentrated between 0.95 and 1.00. Since the Canadian economy is tightly bound to the U.S. economy via international trade relations, this may well be the natural bottom for the pair if we assume that the Canada is more dependent on the U.S. than other way around.

The pair trades around parity (0.9 - 1.1 or parity area) when both economies are in balance. 1.10 - 1.125 seems to act like an acceleration band when the pair is leaving the parity area and a support when the pair approaches the area from above.

1.30 - 1.33 has historically been an important resistance zone during periods of Canadian dollar weakness. It has also acted as a support in times when Canadian dollar weakened much past the zone. It is not a coincidence that the zone includes two important big figure levels: 1.30 and 1.33, the latter is also 0.75 in the inverse currency pair (CAD/USD).

Conclusion

I almost got away with writing an article about the Loonie without mentioning oil. And yet dramatic fluctuations in the pair in recent years have been tightly correlated with shifts in price of this commodity. Supply glut in the oil market coupled with weak global demand is expected to weigh on Canadian dollar for at least some time to come.

Given that we had two 50 cent (5000 pips) upswings in the pair since mid 70's, a reasonable target for the current upswing would be somewhere between the above-mentioned broken trendline and the 1.43 - 1.45 resistance zone.
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