Price action in USD/CAD appears to be in congestion. Let’s take a look at the chart to assess the technical set up.
Coiling: The 4H chart shows that price has retreated from 1.2798 to 1.2350, and has since been coiling in a triangle pattern. This reflects tension, which one would expect to have been released after Friday’s US and Canada jobs data. We all know US data impressed, but so did Canadian data. Still, the US jobs market has been on a run and January’s data was indicative of a strong trend, while the Canadian labor market is slumping and January’s data was only one ray of sun in the grey clouds.
Bullish Reaction: The eventual reaction was bullish, but USD/CAD was not able to carry that momentum into a bullish continuation scenario. Instead, it respected a triangle resistance as we saw in the 4H chart. Now, price action is being squeezed between the 100-, and 50-period SMAs.
Bullish Scenario: If price pushes above 1.25 it would likely be a sign that bulls are indeed in control. This bullish breakout could continue the prevailing trend at least to threaten the 1.2798 high.
Consolidation Scenario: However, if price holds below 1.25, and returns to the 1.2350 area, the short-term consolidation mode is not over. I would suspect that if price cna break below 1.2350, the next key level will be around 1.21, where the 200-period SMA resides.
Fundamental data from the US and Canada will be light this week. A break above 1.25 would open up 1.2798 but it might not reach it, or break it until the end of the week.
In the monthly chart, we can see that there is still room to rally until the 2008-2009 high around 1.30. Will the USD/CAD continue this uptrend?
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