Since making a new high on the year of 1.1466 last week, the USD/CAD has been consolidating, falling to 1.1281 this week.
(click to enlarge)
The 4H chart shows a bullish market that is in bearish correction. However, we should note that currently, the bullish momentum from last week’s new-high-rally, is still preserved in as the 4H RSI holds above 40.
Price action is at the crossroad, and has some downside risk toward the 1.1250 area. We should expect some support there for another attempt to break above the current falling channel consolidation.
Now, if price holds above 1.1280, the USD/CAD would show the the consolidation is no longer bearish but neutral. Then, if price follows with a break above 1.14, we are likely shifting back into the bullish mode, with pressure on the 1.1466 level and with risk of breaking higher.
The immediate target above the 1.1466 high on the year will be the 1.15 psychological level. We will need to look at the monthly chart to monitor key levels to expect sellers from.
The monthly chart shows a market that been drifting higher since 2011. Price is still essentially within the range of the late 2007-2009 price action roughly between 0.9056 and 1.30.
Above 1.15, the 1.17-1.1725 area was a support/resistance area going back to 2009, and 2007. The 1.1875 pivot is another level to expect sellers, especially with the monthly RSI probably above 70 at that point, which reflects overbought conditions in the long-term.
Today, we had some positive retail sales and consumer sentiment data. However, the USD fell across the board afterwards, as we saw in the USD/CAD as well. Now, as mentioned before the consolidation has downside risk to 1.1250, and we would still have a bullish outlook. Next week, we don’t have much CAN data, but lots of second-tier US data that can help decide whether USD/CAD will return above 1.14 and push to new highs on the year, or whether the consolidation/correction will continue below 1.1250. It will mainly be a USD-story, so focus on the FOMC minutes reaction on Wednesday and the Inflation (CPI) reaction on Thursday to continue assessing the prospect of a bullish continuation.
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