Hello Forex Traders,
This week has brought has more Euro uncretainty and weakness, Yen weakness, and also some Aud revival. What could we expect for the remainder of the week on this midweek day of Wednesday? I am curios how the CAD will respond at these levels, so our article will review the USDCAD and EURCAD.
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The CAD has had building permits recently soar up to very high levels. Tony explains more on that in his article. The increase of building permits could explain partially why the CAD has been quite strong recently.
However, price has retraced down to a critical level. Will the price bounce up or keep moving downwards? Let us examine all the relevant charts!
Here are my observations on the weekly charts:
1) Price was in an uptrend channel (blue lines)
2) Price was very close weekly and monthly resistance (horizontal red)
3) Price could not maintain its momentum and broke that channel last week
4) Price still remains in a shallower uptrend channel (purple lines)
5) If a Fib is placed on the 1st wave, then price bounced off of the 500 Fib (green circles)
6) The Fib bounce saw price move up towards the -0.272 target and take out the target at 1.4138 (green circles)
7) If a Fib is place on the entire down, then price respected the 886 Fib of the monthly chart which had the same price as the -0.272 (not on chart)
8) There is a broken top to the left which could act as support now (blue circle)
9) And a weekly support fractal lower, together with the bottom of the channel (purple circle)
On daily chart there are hints that the upside is of a corrective nature (lots of overlapping price action) and most recently 5 waves have been completed. Also, there is divergence between the most recent tops (green) and the bigger 2 tops (purple).
Here is where I am looking to trade this. On the daily chart you see green and red circles. I am on the look out for a bounce to the upside. Even though the currency has signs that the uptrend on the daily and weekly might be over, at same point in time the currency is going to make a hookback up even if it were to continue its fall there after.
That bounce does not have to happen right here, right now. It could bounce from lower, such as the next weekly support area. The current low at 1.3650 is a level I am keeping an eye on.
The bigger trades are of course in the following zones:
1) Upon the break of the uptrend channel (purple) to the downside
2) A move up which is followed by resistance and rejection (red arrow)
3) A continued move up with the trend (albeit be careful of the resisance at 1.40, top of trend channel at 1.42, and monthly tops at 1.43-1.44
What is your view of the EURCAD? Are you planning to trade it and if so how? I did not mention the types of potential entries as yet because I wanted to see if any of the readers would be able to guess how they could catch a bounce trade if they wanted to?
By the way, we discussed other currencies like the majors and some crosses here:
The USDCAD has broken out of the weekly triangle (brown trend line) but the break so far has been very slow and snail paced. Recently price could not break the 1.06 daily resistance level (red horizontal lines) and it has been moving down ever since.
Now price is yet again at support. Obviously the bottom of the uptrend channel (blue) is back in play and could provide that support needed for the USDCAD to make a revival of the trend. Other support levels are a tad lower (green and purple). A bounce trend any where between here and 1.0250 could be on the menu for sometime this week.
Thank you for your comments, they are greatly appreciated. Is there a currency which you would like to see analyzed? Let me know and we will take a look at that pair in tomorrow’s article.
Thanks for reading and sharing, and as always Good Trading!
Winner’s Edge Trading, as seen on: