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Price Action Setups – USDCAD Set For a Move Higher?

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The market was fairly uneventful today in terms of setups. So instead of posting a bunch of levels to watch I thought it more constructive to take a closer look at one currency pair from a few different angles. This is a level I’m closely watching on the daily time frame as well as the 4 hour.

USDCAD ended last year with a bang, rallying nearly 1,000 pips from January 1, 2013 to December 31, 2013. Since that time, however, the pair has either traded sideways or trended down. But that may be coming to an end…

As you can see from the chart below, the market is resting on a trend line that dates back to August of 2012. This is confluence #1. Scroll down for more.

usdcad daily forex chart

Now we come to the opening range for USDCAD. By opening range I simply mean the price at which the pair opened the year (2014).

It’s a little known fact that the opening range can provide a great place to look for support or resistance. Markets have a tendency to respect these levels when they’re tested, as is the case with USDCAD. This gives us confluence #2.

usdcad daily forex chart

USDCAD is resting on the highs from 2010 and 2011. If that wasn’t enough, this level also lines up perfectly with the 38.2 Fib level when using the start of the trend line. As most of you know I’m not a huge fan of Fib levels, but it can be a useful tool at times. That makes confluence #3 and #4.

The fact that the market is at the 38.2 level doesn’t have much significance, however when you combine it with the other factors we discussed above it certainly plays a role.

So with all that said, am I buying USDCAD?

Nope. Well, at least not yet. I need to see more in terms of a price action buy signal. We have all the confluence we could possibly want at this level, now it’s time for some confirmation.

usdcad weekly forex chart

As a last minute addition we have AUDNZD. I highlighted the trend line break last week and today the market was able to test the level as resistance.

I’m not overly convinced one way or the other at this point. It really comes down to whether or not AUDUSD can break resistance around .944.

Here is my tweet from earlier today regarding AUDUSD along with the AUDNZD chart below.

audnzd daily forex chart

Leave a Comment:

4 comments
NIck says

In you view what is more important a trend line with 5 touches or current trend? just based on your experience? http://screencast.com/t/XwKn5FOCa5A the dollar is clearly in a down trend on the weekly chart

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Angela says

I also noticed with regards to the USD/CAD pair on the Daily Chart that price has reached the 161.8 Fib Extension Level from the Previous ABCD move. Point C was 05/06/14. Yesterdays candle was an indecision candle with a Bullish close.

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    Justin Bennett says

    Nice spot. It seems USDCAD needed a bit more time to gather itself, but the pair is starting to gain some traction.

    Reply
Robert says

Hi. Your analysis of USD CAD was very interesting. I even took the chart to Monthly view. See the image. The January bullish bar was the largest and all bearish bars afterwards (Feb through June) were essentially “inside” the large “mother bar”. 5 months of wiping out the gains made in January. Now that may sound too far fetched, but the theory remains true. Another thing is that as you pointed out, currently it is testing the support key level. Notice the 20 EMA remains the dynamic support. The test here appears to be very critical as there has not yet been any rejection. The overall trend from June 2012 appears to be up (the yellow trendlines). Many can view the 5 or 6 months of “correction” or pullpack from the swing high, which means that the uptrend will continue. At the same time, notice the touches on May – September 2010, October 2011 and the breakthough on January 2014. The “breakthrough was not a true one, meaning there was no bar breaking through the resistance. There was a pin bar on 12/2013 then a large “mother” shot up from the close of the pin bar. In addition, the “time/space” was expanding during these periods of touches (at resistance). What would the conclusion be based on the above analysis? THank you.

http://snag.gy/LjU2t.jpg

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