The case for a USD/CAD rally
As of this writing, the
TradingMarkets Forex PowerRatings has USD/CHF in
the top spot. This is despite the market’s failure at important resistance
late last week, and a bout of significant weakness today. It suggests that
there may yet be a punch through in the days to come, but only if that strength
holds up.
The daily chart below shows quite clearly the situation in USD/CHF at the
moment. The market has rallied sharply since mid-January, when it
effectively rejected a probe below the 1.2700 level. Last week the rising
trend met up with resistance from December’s intermediate peak around 1.3200
which could not be overcome at the time.
Until today, the pull-back from the highs put in last week had been nothing
of any major concern. In the early action this morning, however, the
1.3050 level was breached. That level had held up throughout the
consolidation, as the intraday chart below outlines. It getting broken
today could be significant, depending on what happens in the near term.
The rally back in USD/CHF since this morning’s sell-off has been solid, but
the market still faces a chart image presenting both a lower most recent high
and a lower most recent low. In order for us to take the view that the
market is going to do more than just trade sideways for some time, consolidating
below that 1.3200 resistance point, we need to see a break back through 1.3100
fairly soon, and a sustained period of trading above there. If the market
cannot demonstrate that kind of strength, then from a short-term perspective it
would worth looking at shorting opportunities.
John Forman is a near 20-year veteran of trading and investing across a wide array of markets and instruments. He is author of the forthcoming book,
The Essentials of Trading
(Wiley, April 2006). His analysis and market comments have been found in the financial news media across the world and he has published dozens of
magazine articles on trading methodology and analytic technique. To learn more about John’s research and trading activities, visit the
Anduril Analytics website.