USDCAD Breaks Wedge Resistance, Targets 1.4190

Over the weekend, I mentioned the bullish wedge that has been forming on the USDCAD 4-hour chart for the past two weeks. In that commentary, I also noted that an opportunity to get long would only materialize on a close above wedge resistance.

Sure enough, the last 4-hour candle managed to close well above the key handle, solidifying the bullish breakout. This accelerates our previous idea into a full blown trade setup with favorable upside potential.

However, in order for an extended move higher to be realized, the bulls first needs to deal with the 1.40 handle. This will be no easy task considering it not only represents the 2015 high, but the 2004 high as well.

The fact that current prices are just 50 pips below this level means that a properly timed entry will be of the utmost importance for those looking to get long. In order to secure a favorable risk to reward ratio, one of two things needs to happen. Prices need to retest former wedge resistance as new support or we need to see a close above the 1.40 handle.

If the bulls manage a close above this level, we could see a larger bull trend develop with an initial target of 1.4190. This was the July 2003 high and also represents some very prominent highs during the mid 1990’s.

On the flip side, a close back below former wedge resistance would negate the immediate bullish bias and expose key support at 1.3815.