Forex Technical Update
- The USD/CAD's double top spotted on Friday is not relevant anymore as the market is developing a congestion triangle, and is nearing the apex.
- Still that 0.9910 level appears to be pivotal, as the market attempted a couple times to break it, but failed to close above it in the 1H chart.
- The RSI also appears to be stuck between 40 and 60, reflecting either a narrow range, or in this case, a congestion.
- Price action will be contested to the downside all the way down to the 0.9750 level. In the short-term, this should be the maximum target in consideration of it being a possible bear trap. In fact, failure to break below 0.9830 still maintains a bullish bias towards parity.
- Below that we may open up the bearish outlook in the short-term to 0.9650. Even this is a conservative correction target in consideration of how strong market was to the upside last week.
- However, keep in mind USD/CAD is still below parity, and in the past year, the market has been able to fade strong rallies in the USD/CAD. Check out the March 2010 action where the market bent the decline to neutral position, but eventually fell.
- So the question is did anything change fundamentally? Or is the market just taking another break, and should be faded back towards the 2011 lows, 0.9464, and 0.9406.
Parity Breakout Scenario:
- This week, if the market can break above 0.9920, it maybe knocking at parity again to open up a medium term bullish outlook from a double bottom perspective. (1.05 was noted as a possible target above parity). This uses 0.95 as support (being conservative instead of using the 0.9464-0.94 lows), and 1.0 as resistance. The 500 pip range is projected to the upside when there is a break above 1.0, and thus the 1.05 target.
- From the 2010 high to 2011 low, this 1.05 target is near 78.6% retracement (1.0545). 61.8% retracement stands near 1.03, and can also provide some short-term resistance against a bullish market.
Fan Yang CMT
Chief Technical Strategist