USD/CAD on its Way Back to 1.28

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USD/CAD on its Way Back to 1.28

USD/CAD has been consolidating in a descending triangle since making a high on the year just under 1.28 at the end of January. The daily chart shows that this triangle has been broken, and the high near 1.28 is likely going to be tested soon.

USD/CAD Daily Chart 3/11
usdcad daily chart 3/11
(click to enlarge)

The daily chart also shows a prevailing trend that is intact.
1) The moving averages (200-, 100-, and 50-day) are still sloping up and in bullish alignment. (200 at the bottom, 100 above that, and the 50-day SMA above the 100-day). 2) 2) The RSI has held above 40, even 50 after tagging above 70. This shows maintenance of the bullish momentum.

Also, note that since the consolidation, every time there was a strong bullish breakout, USD/CAD was faded before it could reach the previous key resistance pivot. Well, this week, this pattern will have been broken, another reason to believe USD/CAD is poised to test that 1.28 high.

With the prevailing uptrend intact and a bullish breakout from a recent consolidation, we should be expecting bullish continuation. In this scenario, if USD/CAD also breaks above 1.28, the next target will be the 1.30-1.3060 area. This is a psychological level (1.30), and an area that involves the 2008 and 2009 highs.

USD/CAD 4H Chart 3/11
usdcad 4h chart 3/11
(click to enlarge)

In the 4H chart, we can see a consolidation between 1.24 and 1.2550 before last Friday. Then, after the US jobs report on Friday, USD/CAD shot up but stalled around 1.26. This week, price found support at 1.26 and is now pushing at 1.27. This development also suggests a bullish outlook toward 1.28.

Now, if price falls back below 1.26, the bullish outlook will weaken, but the bearish outlook would still be shelved. If price falls below 1.25 however, it would clear below the 200-, 100-, and 50-period SMAs, which further takes away from the bullish outlook. In fact this can introduce the bearish outlook at least back towards the 1.2350-1.24 lows of the descending triangle.

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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.