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.
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.
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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