Analysis: Looking For a Turn in USD/CAD around the Holiday
For some reason or another currency markets have a tendency to stage reversals around important holidays. The Easter Holiday in particular is notorious for this. We assume it is due to the fact that capital markets in Europe are closed for several days- leading to reduced liquidity everywhere else. While a lack of liquidity more often times than not leads to reduced activity as nobody wants to transact it does occasionally lead to sharp moves and increased volatility as the lack of liquidity prompts wider than normal price jumps when participants are forced to transact because of news or other catalysts. We would never advocate trading counter-trend solely because it is a holiday, but when a holiday aligns with other cyclical methods it does usually present a solid risk/reward opportunity.
We will be looking to get long Funds (USD/CAD) over the next few days. A clear Fibonacci related medium-term cycle turn window starts on Friday and extends into Tuesday. At the same time the exchange rate is nearing a critical support zone between 1.0120/40. In this area there are several key retracements related the year-to-date range, a measured move projection of the early March decline and the 2nd square root progression from this year’s high. All are potentially important. A successful test of this zone with the positive cyclicality seen next week should lead to higher prices in Funds.
USD/CAD Daily Chart: March 28, 2013
Charts Created using Marketscope – Prepared by Kristian Kerr
Event Risk Over Coming Sessions:
Source: DailyFX Calendar
LEVELS TO WATCH
Resistance: 1.0195 (Wednesday’s high), 1.0240 (Gann level)
Support: 1.0140 (50% of year-to-date range), 1.0120 (Measured move of early March decline)
STRATEGY – Buy USD/CAD
Stop: 1.0095 (-50 pips)
Target 1: 1.0240
Target 2: 1.0285
--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
To contact Kristian, e-mail firstname.lastname@example.org. Follow me on Twitter at@KKerrFX.
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.