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USDCAD Consolidation Ends, Next Leg Lower Begins

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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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USDCAD channel

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6 comments
Peter says

Regarding nzdusd, it has busted through the previous high of 0.7320 and hitting 0.7350… so is the uptrend continuing or has nzdusd hit the TOP?

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    Justin Bennett says

    What does the daily chart tell you? As I mentioned in yesterday’s post, the daily close at 5 pm EST is key. Everything else is just noise.

    Reply
Peter says

Below 0.73 is key.. got u.. another few hours to go

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Fanelle says

Hi Justin, so far you are the most reliable FX analyst I have come across. The USDCAD did exactly what you said. Thanks for your valuable insight

Reply
    Justin Bennett says

    Glad I could help, Fanelle. They don’t always work out this way, but it’s nice when they do. Cheers.

    Reply
JOHN HURLEY says

Hi Justin. Your analysis of nzd/us was accurate to the pip..Brilliant trading sir.

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