The USD/CAD has been trading in a falling channel seen in the 4H chart since marking a new high on the year at 1.1466 earlier in November.
A Falling Channel: In the 4H chart we saw can see price action held within a falling channel, with lower highs and lower lows until today. Also note that the RSI has tagged 30 to show bearish momentum.
Bullish Continuation Signal: Today (11/27), USD/CAD is signaling bullish continuation with a breakout from November’s falling channel. We can also see that price is pushing back above the 200-, 100-, and 50-period SMAs, reviving bullish bias. The 4H RSI also broke above 60 to show loss of bearish momentum.
Breakout confirmation: Now, if price pulls back, let’s monitor the 1.13 area. We can give it some elbow space, but it should not reach too far below 1.13. If USD/CAD then climbs back above 1.1325, the bullish continuation signal would be confirmed. In the short-term, there would be upside risk towards the 1.4466 high, with risk of breaking higher because the prevailing uptrend is intact.
If price starts to hold below 1.13, then, we are likely still in consolidation with a bearish bias.
The technical picture in the daily chart reinforces the bullish continuation scenario. First of all, price is staying above the 200-, 100-, and 50-day SMAs, and in fact just bounced off the 50-day SMA as support.
The falling channel in the 4H chart looks like a flag pattern in the daily chart. The daily RSI has tagged 70 and held above 40, showing persistent bullish momentum.
Now, in the scenario that price continues to consolidate, the next key support level below 1.12 will be around 1.1150, where price would approach a previous support pivot, and test a rising trendline from July. A break below 1.11 might be needed to convince the market that USD/CAD is shifting from a bullish trend to a neutral one.
Previous Post by Author: GBP/USD Testing a Recent Price Bottom