In my last post on the longer term view of this pair, I mentioned that how the pair reacted at 1.0800 would be critical in its longer term movements (this analysis was contributed to ForexPros.com and can be seen under my submitted analysis – My analysis of the eur/usd and usd/jpy can be viewed daily, all day, on the homepage of the site as I provide an idea of what to expect through the upcoming trading day).

We know know that it reacted strongly with the USD gaining over 700 pips against the CAD since that level was touched.

Several factors point that we are in the start of a new uptrend.  RSI has moved up above 70 which it did not do on the downswing.  Thus we have a breakout on the RSI.  The (small) correction also held above 40, which is a strong sign.

With the rate surging, at the moment, higher we will likely test the trend resistance line.  This trend line is just below the former swing high at 1.1750, the former swing high is at 1.1800.  Obviously a break of that level will be required to really confirmed a reversal and a new uptrend.

The trend line moved down over time so the break of that trend line can give us early indication of a  move ever higher.

The break above 1.1800 indicates a move to 1.2800 over the long term.  This could be adjusted as low as 1.2400 depending on the when the breakout occurs.  The longer it takes to breakout, and thus the lower the trendline price is when the breakout occurs, the lower the profit target will be.

Failure to move above 1.1750 (this will decrease over time as the upper trend line falls) and ultimately 1.1800 would mean a testing of the small correction lows at 1.1200 and a more significant correction.  A break below 1.1200 would indicate further weakness and a likely resumption of the downtrend.  That downtrend would be confirmed with a move below 1.8000.  Intermediate support between 1.1200 and 1.8000 is 1.0950.  If that level can hold, it will likely be choppy trading for a while as the market chooses a direction.

BOTTOM LINE:  Right now it appears we are heading even higher, but we are still in a downward sloping trend channel.  Corrections should hold above 1.1200 and and resistance is expected between 1.1700-1.1800.

Keep in mind, oil is breaking hard, and you see that analysis at http://www.darkpooltraders.com/vb/energy-futures/106-oil-about-break.html.  Get the analysis and updates to that trade there.

Falling oil prices hurt the CAD, which will mean the USD is likely to rise in relation to the CAD.  It is not a perfect indicator, but as a general guideline it works well.  This means the USD/CAD currency pair is likely to push higher as oil prices fall.  While this is not an oil analysis, a move back to former lows is not expected in oil, so the oil fall is likely to be  just  a natural correction.  Thus I believe oil will fall, but for a short time.  Large moves in oil can affect the pair dramatically…as they did today (June 22).  Thus, keep an eye on oil when following this pair.

The average daily range of the pair is currently hovering around 150 pips per 24 hour period starting at 00:00 GMT.  Keep this in mind when making projections for day trading and when using profit targets with time constraints.

Please add comments or if you questions please ask them view the comments link at the bottom of the post.

Want to learn more about chart patterns or other forex and stock market trading methods?  Check out my Trading Courses page.

Source: Forexyard, USD/CAD Daily Chart

To Your Trading Success,

~Cory Mitchell, CMT
Chief Market Strategist
Remember, failed breakouts are tradeable too!

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