Early in Thursday’s trade, USDCAD closed above the two-month trend line that extends off the January high. At the time, it was just an intraday break on the 4-hour chart. However, the pair later managed a session close above the key handle.
The break appears to be valid, and I have no reason to doubt it at the moment. That said, USDCAD still faces some key levels above that could prove to be problematic for the bulls.
The first of those levels was tested yesterday shortly after the break above trend line resistance. That level comes in right around 1.3260.
Although it’s a bit hard to distinguish from the 4-hour chart, a look back at the price action from October and November of last year shows why this could be a critical area to breach before additional buyers are willing to commit.
The price action of late leaves us with two possible scenarios going into next week. We either get a pullback to former trend line resistance, which should act as new support, or the pair closes above 1.3260 (without retesting former resistance), which should solidify the upside potential.
Either way, I won’t be doing anything until we move past the holiday trade that has drained liquidity from today’s session. I don’t expect that to happen until Tuesday or Wednesday of next week as Monday’s docket hints at another lackluster session.
