USD/CAD Tests Multi-Month Daily Trend
The USD/CAD has been giving us mixed signals throughout 2011. Currently, the Pair is trading near the parity figure, which has been traded through previously in January, and September. Currently daily support is found by connecting the July 26th low at .9405 with the September 16th low at 97.84. Currently price is testing a third touch of support and is awaiting the pair to either bounce or break.
Fundamentally, the USD/CAD trades in an inverse correlation with USOIL. As concerns about the global turndown have subsided we have seen the CAD and Oil prices rally. If recovery remains a theme we would look for our daily trend line to break. Conversely, if another bout of economic crisis emerges, this is a potential catalyst for both pairs to bounce off of their established trend lines.
Taking Price in to a 4Hour chart we can see our downtrend established from our October 4th high of 1.0656. Price has been moving steadily downward to today’s low of just under parity, at .9989. If price is to make new lows it must stay under resistance found at 1.0190, denoted by our 78.6%Fib line. A break above this level and a new high on the chart would indicate a validation of our daily support line seen above.
My preference is to sell the USD/CAD against its 78.6% retracement at the 1.0190 level. Stops should be placed outside of the previous high at 1.0250. Limits should look for 1.0070 or better for a clear 1:2 Risk reward ratio. Secondary targets may search for lower lows under parity.
Alternative scenarios include price breaking through resistance and moving on to new highs indicating a bounce off our daily trend line.
---Written by Walker England, Trading Instructor To contact Walker, email firstname.lastname@example.org
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