USD/CAD stays firmly above its 200-day EMA
USDCAD finally pushed above its 200 ema on Tuesday last week, the first of such a sustained break above this indicator since May’05.This is coming on the heels of failed attempts in April’06 and July’06 making the recent break a significant one.
Since early 2002, USDCAD has been on a downtrend hitting a low of 1.0971 in May’06, the lowest price since 1991.A two-month consolidation followed and in early July’06 a breakout to the upside occurred pushing the pair briefly above its 200 ema.After the price failed to hold above this level, USDCAD embarked on a fresh sell off throughout the month of Aug’06 putting in a higher low at 1.1030 which was then followed with another unsuccessful attack on the upside stopped by its falling trendline drawn off April’06 highs. The decline halted at 1.1085 forming an additional higher low, which ultimately broke above its falling trendline in Oct 04’06.Prices hesitated above this level for four trading sessions until it shot to the upside breaking above its 200 ema last week.
Figure 1: Daily Chart
Figure 2:Weekly Chart
Following a break above its 1.0926-11294 range and the subsequent sustained push above its 200 ema, USDCAD is now on the path to challenging a convergence of .618 Re at 1.1451(April-May decline) and 1.1456(July’06 high) resistance under which it has been trading since April except for a failed break above the 200 ema in July’06.A successful penetration of these levels would obviously open the doors for further gains towards 1.1776 level, its April’06 high and possibly higher towards its early Nov’06 high at 1.1979.Additionally,although overbought condition has set in on the daily chart, the weekly and monthly momentum studies are positive and pushing higher supporting an additional gains in the days and weeks ahead. On the downside, support is seen at 1.1309/07 zone, its former range breakout point and the current location of its 200 ema.Further down,1.1225 comes into focus which is where the 100 and 50 emas are converging. On the whole, holding above its 200 ema puts USDCAD in position to push for higher price gains
Happy Trading
Mohammed Isah is an independent technical analyst and 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 on fxstreet.com,actionforex, forexfactory.com and www.tradingmarkets.com/fxtechnicalresearch.He can be contacted for enquiries at:misah@spencerfx.com
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