USDCAD remains in a clear channel
USDCAD sold off towards the bottom of its rising channel yesterday to close at 1.1210.It is now trading below the blue horizontal line, which denotes its former range top.
USDCAD rose to as high as 1.1771 in April 2006 before declining sharply to hit a temporary bottom at 1.0926/73 levels after its multi year downtrend that began in 2002.It traded in a range between 1.0961 and 1.1264 for more than two months until it finally broke out to the upside in July 2006 and later hit resistance around 1.1456 levels and sold off below its breakout point shown by the blue horizontal line.USDCAD has since been trading in a rising channel following the failure of price at 1.1440/53 levels in July.
Figure 1: Daily Chart
Two important things played out in the past in this pair’s quest for upside incursions. The first is that on the two occasions that the price rallied to the upside, one in April and the other in May, it was turned down by the 200 ema.Secondly,although the falling trendline originating in May 2005 has been tested many times ,it is still unbroken,a sign of strong resistance. As can be seen on the chart, the daily and the weekly studies are pushing lower suggesting that more downside losses are expected. On the downside 1.1172,the channel bottom comes into play ahead of 1.1040, July’06 low and ultimately 1.0926, May’06 low. Resistance is seen at 1.1351/86, falling trendline/.50 Ret/200 ema and 1.1447/56, July’06 high/.618 Ret.
Figure 2: Weekly Chart
All in all, until a sustained break and a close below the channel bottom is achieved, USDCAD will continue to trade in the channel but a break above 1.1456 taking out the falling trendline and the 200 ema invalidates this view.
Happy Trading
Mohammed Isah
is a private trader and an independent technical analyst. He initially traded stocks and now primarily focuses on forex. He produces Weekly, Mid-Week and Friday forex technical research which is available at
www.tradingmarkets.com/fxtechnicalresearch.
He also has a Daily, Weekly and Monthly pivot points reports. You can contact Mohammed on his pivot points reports and other enquiries at:
isahmo@gmail.com