USD/CAD is not waiting for the Bank of Canada to talk more about its monetary policy. USD/CAD is breaking down below some important technical levels suggesting further weakness.
Since May 2016, USD/CAD has been contained inside an upward sloping trend channel. That trend channel broke last week and prices immediately began to pressure the 200-day simple moving average.
Then, on January 12, prices temporarily broke below the moving average before popping back above it. This price action is suggesting some weakness on the horizon. Therefore, we will sell into continued weakness on technical breakdowns.
Today’s low of 1.3019 offers a starting point for a technical break down.
From an Elliott wave perspective, we think a break down has room to fall. The correction from Jan 2016 to May 2016 was an impulsive move to start a trend. That price action suggests we can anticipate another correction of similar size to the January-May correction…or nearly 2,200 pips.
Therefore, our initial target on a successful break lower is near 1.22 with a secondary target near 1.14.
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---Written by Jeremy Wagner, Head Trading Instructor, DailyFX EDU
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