The USDCAD may have finally bottomed out following the release of the U.S. industry numbers for May, which exceeded all preliminary forecasts. The manufacturing sector reported record-breaking factory activity, underlining the robust recovery of the broader economy.
This is the first major economic release from this week that is contributing to the strengthening of the greenback. The currency is expected to rally against other majors in the near future, especially against the overbought pound.
As regards the USDCAD, the pair has been behaving exactly as per the projections of the Wyckoff Cycle Method, as can be seen on the 4H chart above. The almost textbook behaviour of the price action underlines the clearly discernible varying stages of the cycle.
Following the completion of the last Markdown, the pair went on to start establishing the current Accumulation range. Its existence is confirmed by the ADX indicator, which has been threading below the crucial 25-point benchmark since the 14th of May.
Now that the greenback is ready to recuperate some of its losses against the Loonie, the timing seems perfect for bulls to step up at the current bottom.
Earlier today's development of a Hammer candle, which entails rising bullish pressure around the lower boundary of the Accumulation (at 1.20250), underscores this bottoming out of the price action. The Stochastic RSI indicator also elucidates this.
Hence, the price of the USDCAD is now ready to head towards the range's upper boundary at 1.21350. Before it can do so, however, the price would have to break out above the 50-day MA (in green) and the 100-day MA (in blue).
The two moving averages have already turned away the direction of the price action on two separate occasions, while it was contained within the boundaries of the Accumulation range.
The U.S. manufacturing PMI was revised higher to 61.2 index points in May, up from the initial forecasts of 60.8 points. This measures a sizable increase from a month prior when the index was recorded at 60.7 points.
The massive upsurge in factory activity and new orders is mostly owing to a sharp uptick in global demand. This is already being reflected by the energy market, particularly on the price of crude oil, as well as on the price of gold.
The global increase in industrial demand is one of the prime factors currently fuelling the beginning of a new supercycle.