USDCAD Maintains Its Upside Bias
USDCAD registered a second week of upside gains on Friday following its recent break above its rising channel established since Sept’06. Aside from attaining the highest price since early April’06, the pair has also recorded three straight monthly gains from Sept’06 to Dec’06.
After a decline that began in 2002 at 1.6196 high halted at 1.0926 in May’06, USDCAD began what could be seen as a corrective move rallying with an unimpressive retracement to a seven-week high of 1.1453 in Jul’06 before failing above its .618 Ret (1.1776-1.0926 decline)/daily 200 ema at 1.1410/45.The pair tumbled from this zone embarking on a six-week decline and forming a swing low at 1.1030 in late Aug’06.Since forming this swing low,every higher high has been met with a corresponding higher low pushing the pair through its July’06 highs(1.1411/56) and major emas to form a rising channel which ultimately gave in late Dec’06 paving the way for price gains towards 1.1786 last week.
Figure 1: Daily Chart
Figure 2: Weekly Chart
Figure 3: Monthly Chart
USDCAD should push for higher prices in the days and weeks ahead as long as its major (daily) emas, 1.1430 levels (weekly low) and pattern of high highs and higher lows remain intact. In such an up move, the first resistance comes in at 1.1786, its 2007 high, which coincides with its Jan/April’06 highs at 1.1776/1.1800.On a break and close above these levels, focus will be shifted to its Nov’05 high/Mar’05 low at 1.1978/79 with a violation setting the stage for further gains towards 1.2097, its .382 Ret of its 1.4006 to 1.0926 decline. Beyond here puts the next upside target at its Weekly 200 ema/.50 Ret at 1.2441/59.With the strongest upside momentum signals seen since 2000, USDCAD’s monthly studies remain positive supported by its weekly MACD which has crossed above its zero line, its first significant move above it since May’04.On the other hand, with the daily studies overbought, corrective losses should be expected. The initial downside target for such weakness will aim at the top of its broken rising channel at 1.1629 where a break if seen, will open the door for further losses targeting 1.1500/1.1493 levels, its daily 50 ema/Nov 21’06 followed by its Dec 20’06 at 1.1430 with a stronger confluence of support resting at its channel bottom at 1.1392/75.All in all, having formed and risen off a solid base, USDCAD should continue to push to the upside as long as its bullish indicators remain intact.
Happy Trading
Mohammed Isah is an independent technical analyst,a professional trading instructor and mentor. He initially traded stocks and now primarily focuses on forex.He is an independent market analyst for Spencer Financial LLC.www.spencerfx.com. He produces the firm’s daily technical analysis research which is available at www.tradingmarkets.com/fxtechnicalresearch.He can be contacted for enquiries at:misah@spencerfx.com