USD/CAD – Assessing an Imminent Range Breakout

0
77
USD/CAD - Assessing an Imminent Range Breakout

False Breakout: The USD/CAD has been consolidating in February after reaching a high near 1.28 in January. Last week, we had a false bullish breakout, and price retreated to the triangle’s base. Let’s take a look at the technical set up as the USD/CAD awaits another breakout from a small range.

USD/CAD 4H Chart 3./2
usdcad 4h chart 3/2
(click to enlarge)

Support Continues to Hold: The 4H chart shows the descending triangle and the breakout that stalled at 1.2650. When there is a false breakout, the support/resistance on the other side usually becomes vulnerable. This is especially the case if the false breakout was against the prevailing trend. But here, the false breakout was IN the direction of the prevailing trend.

The support in the 1.2360-1.24 area held. The 200-period SMA also acted as support. The 4H RSI held mostly above 40 after tagging 70, which shows maintenance of the bullish momentum (barely). In the case of USD/CAD, I would say that the false breakout last week has not made the market bearish, and it is poised to break to the upside again. But let’s not get ahead of ourselves and take a look at the 1H chart.

USD/CAD 1H Chart 3/2
usdcad 1h chart 3/2
(click to enlarge)

Awaiting Breakout from Small Range: In the 1H chart, we can see a small price range between 1.2448 and 1.2535. A break above 1.2535 should revive the bullish outlook, with the 1.2650 highs last week in sight .A break above that opens up the 1.28 area.

A break below 1.2448 however puts the pressure back towards the 1.2360-1.24 support area. If price falls below 1.2360, despite a prevailing uptrend, we should expect some short-term bearish correction, and a medium-term consolidation period, with downside risk towards 1.21 and 1.20.

Previous Post by Author: Gold is Starting the Month on a Good Note – Bullish Scenario

SHARE
Previous articleFacebook Shares Ready to Test Range Support Again?
Next articleEUR/CAD – A Bearish Continuation Breakout
Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.