The USDCAD
pair is trading in a falling wedge formation following an incessant
rise throughout the beginning of 2014. However, Signs point towards a
potential breakout to the upside which could spark a return to the highs
of 1.22.
On the daily chart below, there has been
a clear tightening of price action with the falling wedge currently in
place. This comes amid a notable strengthening of this pair and clearly
defined uptrend. Given that this is currently the case, I see the
current move as nothing more than a retracement within a longer term
uptrend and thus am looking for the next leg up higher. As such, I do
not know exactly where this retracement will bottom out and reverse, yet
given the wedge formation is at the point of completion, I would expect
the breakout of it to be both notable and immanent.
Taking a look at the indicators, the CCI
and stochastic both tell a story of an oversold market which is on the
turn towards the upside. Meanwhile the MACD histogram is beginning to
move closer to 0, which signals a tightening of the signal and MACD
line. This typically precedes a cross of the two which on this occasion
would be bullish. Thus overall the picture supports the notion that we
could see a break to the upside.
On the four hour chart, the pair has
found key support at 1.0945 for the moment, with the 200 period SMA
providing near term resistance. The stochastic, CCI and MACD are all
moving higher, which points to short term bullish momentum. However, I
will be watching closely for a break to the upside for a continuation of
the uptrend, where the previous high of 1.222 represents a notable
target, along with nearer levels of 1.1036, 1.112 and 1.1171. Should the
pair break to the downside of this wedge, I would be more neutral in
bias.
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