USD/CAD Technical Outlook: Long-term Support May Soon Be in View
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USD/CAD Technical Outlook
- USD/CAD consolidation pattern could lead to more selling
- Looking towards 2011 trend-line on more weakness
USD/CAD Technical Outlook: Long-term Support May Soon Come into Play
The question we asked last week was, is the decline in USD/CAD pausing or reversing? So far the answer we are getting is that only a pause in the downtrend is unfolding, not a reversal that will send USD/CAD higher to test upside levels.
Yesterday there was plenty of volatility around the BoC, but left the price of CAD amidst the recent congestion. The high of yesterday’s volatile session at 12431 occurred near a swing-low created in July. Using this high as a key threshold, as long as USD/CAD doesn’t close above that high then the outlook will remain neutral to bearish.
A breakdown from here below 12288 should have the trend-line from 2011 coming into view. Should selling commence again here soon we may see the trend-line hit in fairly short order. As always we will want to pay attention to how price behaves at that juncture.
From a tactical standpoint, existing shorts from higher levels may want to use yesterday’s high as a marker for setting trailing stops. Even though the general trading bias is bearish, would-be shorts will want to be careful not to get whip-sawed as price sits amidst a range.
For would-be longs, the picture isn’t encouraging and holds no appeal from a risk/reward perspective. If the 2011 trend-line gets tagged this view may change as an opportunity for a reversal trade may present itself – price action pending.
USD/CAD Daily 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.