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Important: I use New York close charts. Click Here to Use My Preferred Broker
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The USDCAD is a perfect example of why using New York close charts is so important. Although the December 4th and 5th sessions slipped below range support at 1.2670, buyers stepped in to close the pair back above the level before 5 pm EST.
We looked at this range over the weekend. In that commentary, I pointed out how a close above the range top or below the bottom would trigger a breakout opportunity.
At the time I was favoring a break lower given the velocity of Friday’s selloff. The fact that sellers didn’t even hesitate before the weekend didn’t leave much room for a bullish conviction.
It now seems that the USDCAD could go either way given Wednesday’s 96 pip gain that puts the pair right in the middle of this 240 pip range.
I was on the verge of mentioning Tuesday’s bullish rejection candle but decided to hold off and post about the USDCHF instead. In hindsight, I probably should have written the commentary, but the upper wick was a bit too long for my liking.
Both options (USDCHF or USDCAD) have worked out nicely thus far. As for the USDCAD, we now need a break from the current range. That is unless you decided to trade Tuesday’s long-tailed bullish rejection candle that formed at 1.2670 support.
For those of us still on the sideline, it’s going to take a daily close (5 pm EST) above 1.2910 to spring buyers free. The next key resistance above that comes in at 1.3160, giving traders 250 pips to work with.
Alternatively, a daily close below 1.2670 would expose the next key support at 1.2420. That said, given the recent break above descending channel resistance on the U.S. Dollar Index (DXY), I have to favor the upside here.
Keep in mind that this Friday is non-farm payroll at 8:30 am EST. You may want to avoid the USD during this time given the increase in volatility that’s sure to follow. That isn’t an issue, though, given that we need a daily close to confirm the range break.
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