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Previous: USD/CAD Trades at Triangle Support Near Apex (1/18)
USD/CAD
The USD/CAD indeed broke a triangle support seen in the daily chart. We also see a couple of indecisive days (shown be the type of candlesticks formed), until the start of this week, where a strong, engulfing type of candle is confirming the downside breakout. We also see that after a bit of congestion of the 8, 21, 55 and 100- day simple moving averages, the market is now moving under them, and causing the MAs to spread out with a bearish tone.
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These are initial confirmations of the bearish break from the daily chart, but there are some signs that can further confirm. The daily RSI for example has been supported at 40 since establishing bullish momentum (above 70), during August, 2011. A break below 40 reflects loss of bullish momentum. Also, we have a pivot at about 1.0050, and then 50% retracement of the rally since August at 1.0030. With a break below these levels, and if 1.0050 becomes resistance, we can look for the next downside target at 0.9883, a support pivot and 61.8% retracement. (Also look for temporary support at the 200 day SMA which is near 0.9950.)
A Closer Look for More Clues: Taking a look at the 4H chart, we see that the USD/CAD is having some trouble with the 1.0050 area so far with a tail to the bottom (this suggests rejection of a bearish attempt and therefore indecision). Along with a bullish divergence, we might get a pullback. A hold below 1.0115 will be a clear sign of a bearish continuation, but a rally above 1.0150 could be a sign of a failed bearish breakout attempt.
Fan Yang CMT is the Chief Technical Strategist FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
