USDCAD has enjoyed an impressive run since the June low was put in at 1.2125. While we missed some of the initial rally, the gains made since late June have been fair game for anyone who has been following this site.
The first bullish setup occurred on June 30th when the pair made a key break above channel resistance. This descending channel had been forming since mid-March and the market had respected resistance nicely on a closing basis, making the daily close on June 30th extremely significant.
Over the next two weeks the pair went on to gain 370 pips before running into yet another channel boundary, this time in the form of an ascending channel off the May low. The subsequent break of resistance gave us another breakout opportunity that has realized an additional 200 pips of upside based on current prices.
So where to from here?
A quick glance at the monthly chart gives a clear look at key resistance at 1.3063, a level represented by a six-year high from 2009. In fact in order to find a higher high we have to go all the way back to 2004.
While I would typically take profit at such a level, the pair’s recent break of channel resistance combined with my bearish stance for CADJPY leaves me with a bullish bias for USDCAD even in the face of such a significant level.
Of course that does not mean that the upcoming resistance level won’t put up an impressive fight, as I believe it will.
Summary: Watch for buying opportunities while above former channel resistance. A daily close above 1.3063 would expose the next key resistance level at 1.3260 and possibly 1.3470. Alternatively, a daily close back below former channel resistance would open the door for further losses.