USD/CAD Breaks into a New High on the Month

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USD/CAD Breaks into a New High on the Month

Bullish Week: USD/CAD is bullish this week after falling from 1.11 to 1.0886. At the beginning of the week, we saw a break above a falling trendline from the previous week, and price climbed above the 200-, 100-, and 50-hour simple moving averages (SMAs). The 1H RSI tagged 70 then held above 40 and climbed above 70 again, showing persistent development of the bullish momentum.

USD/CAD 1H chart 9/24
usdcad 1h chart 9/24

(click to enlarge)

Breakout: During the latter 9/23 and part of 9/24 sessions, USD/CAD traded in a tight range between 1.1064 and 1.1087. As we begin the 9/24 US session, price pushed above this consolidation, and broke above the previous September high at 1.1098, making a new high on the month.

Bullish Trend: The daily chart shows even more reason to have a bullish outlook on USD/CAD. After price crossed above the 200-, 100-, and 50-day SMAs, it bounced off them as support. This is a bullish slingshot signal. The daily RSI has also held above 40 after tagging 70 showing maintenance of the bullish momentum.

USD/CAD Daily Chart 9/24
usdcad daily chart 9/24

(click to enlarge)

Bullish Target: Now that price has cleared the 1.11 level, USD/CAD looks poised to test the 1.1278, 2014-high. If price breaks above 1.1280, the pair will be at a high not seen since July 2009. This could be a strong bullish signal for the medium and long-term, but in the short-term, we should expect some consolidation under 1.13 especially if the daily RSI is above 70, in overbought condition, and even more so if there is a bearish divergence between RSI and price.

Failure: The market will be bullish unless we get a sudden reversal that pushes price below 1.09, which would break below the 200- and 50-day SMAs and the rising trendline from July. If the RSI also falls below 40 then, we are likely in a major consolidation, and the 2014-high of 1.1278 should be safe for the year.

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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.