On Friday I wrote about two options to sell the USDCAD below 1.3380. The first would have been on a retest of the confluence of resistance at 1.3380/90. This area is joined by trend line resistance, a key horizontal level, and 4-hour channel resistance.
The second option was to wait for a 4-hour close below channel support. This, of course, was the path we’d choose if buyers failed to reach the 1.3380 area.
It appears option number two is now underway. The last 4-hour close at 9 am EST puts the USDCAD below ascending channel support. All eyes are now on the previous week’s low at 1.3164 followed by the key support area at 1.3000.
However, securing a favorable risk to reward ratio is just as important. That shouldn’t be difficult given the amount of space below last week’s low, but it’s important that we don’t chase.
From here I would suspect any retest of former channel support near 1.3230/40 to encounter an influx of selling pressure. As mentioned above, (minor) support comes in at 1.3164 followed by 1.3000.
Only a 4-hour close back above former channel support near 1.3230/40 would negate or at least delay the bearish outlook. Note that Fed Chair Yellen speaks today at 1 pm EST which could trigger some volatility for the US dollar.
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