USDCAD: At a Crossroads

Sophia Todorova has a background in teaching and psychology, and as such relishes the idea of assisting new traders on their journey to Forex trading success. Technical Analysis is her passion. The charts speak, and she listens.

 

 

The recent downgrade of the US is sure to have ripple effects in the market, and the Usdcad, which is trading at a critical level, is a good candidate to measure just how consequential its effects will be. Last week saw a rally off weekly .9440 low and trendline support. This is potentially a significant development, as double bottoms are usually a strong reversal signal.

 

A look at the daily chart reveals a key resistance at .9800 down trendline, which is just below .9920 horizontal resistance line on the weekly timeframe. This resistance, in my opinion loses. The potential for this resistance to hold and for bears to regain control is threatened by the daily channel support line which was breached and retested on Friday. Therefore, any pullback from current levels will need to breach that .9740 channel line for further downside to follow.  For the coming week, .9800 will need to be watched for signs of breaching, in which case, the channel resistance line at .9900 will be the next level that the bulls will have to break, followed by .9920 in order to attain 1.0100 and beyond. To the downside, a re-breach of the channel support line might result in a retest of .9590 congestion zone, and if the bears mean business we could well see a gradual channeling through the weekly lows, as the market tends to do when attempting to break significant support/resistance levels.

 

One way or the other, I think the usdcad will be interesting to watch in the coming days and week, and is sure to offer some good trading opportunities. As it remains above .9700, I am bullish in my outlook.

Thanks for reading, and enjoy the rest of your weekend!

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  • Thanks for your comments, Christopher, and sorry for being so late in responding. Usdcad is still, after all this time, consolidating between 4hr trendline and that dly channel res. line. I’m still waiting for a decisive break in either direction. Thanks again, and happy trading! 🙂

  • Sorry to hear that, Ajmal. I’ll email you

  • Thanks, Mike. All the best in your trading!

  • Christopher1955

    Well here we are four closes later on the daily candle and still nothing decided. Two of the four closes are above the 200 SMA on the daily chart and the other tow of the four are belwo the 200 SMA on the daily chart. Three of the four candles have bodies with nearly 200 pips which is almost unheard of – though we are living in interesting times. When I first posted, I did feel that the pair might resume the trend to the short side, however I am now not so sure. It could really go either way. One interpretation could be that we are seeing a Rising Three Method before continuing long and the other interpretation is that, there having been a bearish engulfing candlestick formation, we are merely seeing a test of the top of the area of resistance. I use a 14.3.9 Slow Stocastic which is giving a reading on the K Line of 84.73 which is pretty overbought and may indicate a fall. However, it has not turned over yet which could indicate room for a further move to the upside. However using the default setting Slow Stocastic of 5,3,3, it has a K line that has clearly turned over and is heading down. I really do think that this one has now become anyones guess – though on that I could be completely wrong though I am not sure how!!!!

  • Christopher1955

    Great
    analysis. The price action has broken through and is now testing the horizontal
    weekly resistance line at 0.99200. I am hoping it might hold. The problem is
    that we are currently above the 200 SMA on the daily charts which is bullish.
    This level has previously held when the 200 SMA on the daily charts was at
    0.99200. The last time price action traded over the 200 SMA on the daily charts
    was about a year ago. There have been breaks above though nothing that has held
    for any significant period of time. If 0.99200 gives way, there is very little
    else to stop it establishing a long-term trend to the long side and revisiting
    some of the highs of 1.3000 and above. In
    my opinion this level is the last chance salon for the USD/CAD. My feeling is
    that the fundamentals will not support this as Canadian economy is in better
    shap that the US
    economy and because the economies are so linked, CAD may benefit from a
    spin-off from the safe-haven status. On the other hand I could be completely
    wrong.

  • Mike

    Thanks Sophias.  Great call. 
    I am still demo trading seeking to settle on a trading system I can own for my self so I was interested in your post.

  • ajmal