Yesterday marked the largest single-session gain for USDCAD since the June 24th Brexit-inspired rally, which set a multi-year record for the pair.
Not only did USDCAD manage to gain 130 pips on the day, but it also began the ascent from a familiar level. The 1.2840/50 area has played a critical role in directing price action since early May and is also the opening price for the June 20th gap.
For those who missed yesterday’s bounce from this area, the 4-hour chart may offer a favorable second chance opportunity. For starters, the 1-hour chart below shows the bearish pin bar that formed at the upper boundary of this pattern during yesterday’s session.
Why am I showing a bearish pin bar that failed?
Because it was an early sign that the resistance level you see above was accurate and valid. It was not an entry signal due to the bullish implications that arise from descending patterns such as this.
You may notice that before yesterday’s retest of this level, there were no prior touches from resistance besides the June 28th high. However, we did have a clear descending trend line from which to draw the upper boundary. You may recall this concept from a recent lesson I wrote on equidistant channels.
The price action on USDCAD is a perfect example of how the technique can be used to identify breakout opportunities at the onset.
With the pair now firmly above channel resistance, traders can begin watching for a buying opportunity for a move back to the June highs near 1.3120.
Do keep in mind, however, that the 1.30 handle is expected to attract selling pressure on the way up. The flip side is that it could also serve as support with the right close above the area.
A daily close above 1.3120 would target the 1.3270 handle, which is the measured objective of the current price structure if viewed as a bull flag, which now appears to be the case.
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