Forex Technical Update

Previous: USD/CAD Breaks Above a Double Bottom after a Slew of Poor Canadian Data (7/29)

Resistance Cluster

- After rallying above a double bottom, the USD/CAD is not pressing up against an important resistance cluster near 0.9640. Here, we have the 61.8% retracement and 200SMA. The market is so far respecting these resistance factors, but has not shown a bearish attack.
- In fact the market just pushed the RSI to 70, showing slight bullish momentum. A break above 0.9640, along with the RSI pushing above 70 is a bullish signal.
- Otherwise there is a chance the market will fall back towards the lows just above 0.94, near 0.9420.
- This scenario opens up with a break below 0.9545, which would also break below the projected rising trendline.
- The daily chart shows that we are also cracking the 38.2% retracement of a larger bear run.
- The next important area of resistance is the 0.9685 area.  A break above 0.97 can be an early reversal warning. Bulls be aware, the USD/CAD has faded many bullish attempts into lower lows. Only a break above the 0.9913 high should suggest a meaningful reversal in the medium to long term (next couple of months after the break).
- Otherwise, watch for a strong bearish day to start the bearish mode again, with the first target as 0.94-0.9420.
USD/CAD 8/3/2011 Daily Chart

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Fan Yang CMT
Chief Technical Strategist