USD/CAD was trading sideways from the end of January through mid-April after which it shifted to a bearish trend, breaking the multi-month range support that was in the 1.2350-1.24 area. Let’s follow up with this bearish breakout starting with the 1H chart.
As we begin the 4/27 Asian session, the 1H chart shows a market that has been consolidating above 1.2085 since 4/17. A short squeeze reached a peak of 1.2305 before retreating. We can say that price regained the bearish posture by late last week as USD/CAD fell below a common support in the 1.2178-1.2203 area and as the RSI dipped back below 30. Also note that the 200-, 100-, and 50-hour simple moving averages are back in bearish alignment and are sloping down with price below all three.
After a rebound from 1.21, price respected the 1.2178-1.2203 support as resistance, and the 1H RSI held under 60. These are signs that the bears are staying in control even in the very short-term. Indeed, the 4H chart shows that bears remain clearly in control in the short-term.
The 200-, 100-, and 50-period SMAs in the 4H chart are sloping down and in bearish alignment with price trading under them. The RSI clearly held under 60. This last bullish attempt from 1.2085 to 1.2305 failed to even test the 1.2350-1.24 multi-month support area. It looks like we should expect another new low below 1.2085 this week.
The 1.20 psychological level could be next. If we take the range of the broken consolidation and project it to the downside from the broken support, the range breakout target would be around 1.1950. (1.2830-1.2380 = 450 pips; 1.24 – 450 pips = 1.1950). Note that this is actually a conservative target with the aggressive target closer to 1.1850.
The point is that the bearish projection should be limited to an area we saw price consolidate in during mid-January, roughly between 1.18 and 1.20.
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