I haven’t had any interest in the USDCAD for months. The last time I mentioned the pair was back in early September when sellers were challenging a multi-year trend line.
Since coming off its 2,200 pip slide in the first half of 2016, the pair hasn’t done much besides chop around with a slight bullish tilt. It’s this type of directionless price action that I avoid like the plague.
But an extended period of consolidation was to be expected after the monstrous selloff between January and April. We’d have to go back seven years to find a more aggressive decline than what took place earlier this year.
Speaking of that decline, the weekly chart below shows how sellers are once again challenging the long-standing support level.
One can’t help but notice the bearish overtones that radiate from the chart above. If the swing highs from 2015 were any more pronounced, we could even make a case for a head and shoulders pattern.
Unfortunately, certain qualifying attributes are missing to label it as such.
What’s also interesting is that, as you may well know, this Wednesday is the much anticipated Fed rate decision. Combine a market-moving event with a multi-year trend line and fireworks are all but guaranteed.
For this reason, I won’t be doing anything until the event has passed and the dust has settled. Despite what some may want to believe, nobody knows what the Fed will do. And even if someone did know, there’s no telling how the market will react.
So I’ll take my seat on the sideline and watch how the USDCAD reacts to this twenty-nine-month trend line. If nothing else, it should make for quite the spectacle.
A daily close below the 1.3100 area would expose the September and October lows at 1.3000 followed by the June lows at 1.2680.
Alternatively, a push higher would likely encounter sellers near the 1.3285 handle. This area served as resistance in October before flipping to support in early November.
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