USDCAD has made a forex breakout from its range in August, indicating that further gains might be in the cards for this forex pair. Price had previously been finding support at the 1.0870 level and resistance at 1.0970, creating a 100-pip range.
The upside break has stalled at 1.1030 though before price retreated back to the broken range resistance. The Fibonacci retracement levels on the breakout move indicate that the next potential correction zone is at the 1.0950 minor psychological handle, which is within the USDCAD range. A deeper correction from the forex breakout might last until the 50% to 61.8% Fib levels.
USDCAD Forex Breakout Setup
Stochastic is starting to move out of the oversold area, indicating a pickup in buying pressure. In this case, price could continue to find support at its current levels then resume its forex breakout momentum, possibly until the previous highs at 1.1030 or higher. The next long-term resistance levels are at the 1.1100 and 1.1150 area.
A drop back inside the range could show that the upside forex breakout was a fake out, which would suggest that USDCAD could continue moving sideways. If this happens, price could fall back to support and test the 1.0850 to 1.0870 floor once more.
Event risks for this forex breakout setup include the crude oil inventories release today and US President Obama’s announcement on the ISIS defense plan, which might spark a run in risk aversion.
Bear in mind though that the path of least resistance for this pair is to the upside, as Canadian jobs data has been far worse compared to the US NFP. In addition, other manufacturing and spending reports have been stronger in the US compared to Canada’s. Risk sentiment might also be in favor of the US dollar for the time being, especially if geopolitical tensions escalate.
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