USD/CAD Technical Outlook: Short-term Chart Ready for a Breakout
USD/CAD Technical Outlook
- USD/CAD sideways chop set to give-way soon to a breakout
- Looking like a breakout higher, but need to wait for confirmation
USD/CAD Technical Outlook: Short-term Chart Ready for Breakout
USD/CAD has been chopping around the past week-and-a-half, offering virtually no cues on its next direction. But that is beginning to change as a wedge formation on the 4-hr comes into focus. A breakout needs to confirm, and that should come soon as price nears the apex of the pattern.
Given the direction (up) price was moving prior to the pattern developing, it would appear this will be a continuation pattern that keeps USD/CAD rolling higher. To confirm this, we need a break of the upper trend-line of the wedge with a 4-hr candle close above 12690 to provide full conviction.
In the event of a top-side breakout there is a slope from early June to contend with, one that the wedge began developing off of. If that can be crossed along with the most recent swing high at 12762, then the next objective will become the 12950 area, which has been a major level in play for some time. It began as a low in 2019, but then was validated as support and resistance last year, and once again as resistance in August.
In the event we see the wedge trigger to the downside, a breakdown below the lower trend-line of the pattern is needed. To add confirmation, I’d like to see a 4-hr candle close below 12616. This could have USD/CAD rolling downhill back towards the 200-day at 12519 and early month low at 12493.
All-in-all, price action is tightening in an unsustainable fashion and some type of breakout appears imminent; will work with the above scenarios upon confirmation of either. We could see a false breakout before finding the eventual direction, something we will have to deal with as it comes.
As a general rule of thumb, I keep the number of entry attempts to a maximum of two on any idea. So if things get sloppy and we get a couple of false breaks that trigger a stop-loss, then I will walk away until another day.
USD/CAD Daily Chart
USD/CAD 4-hr Chart
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.