Is the latest USDCAD breakout a bull trap?
Or can buyers push the pair higher from 1.3300?
Watch the video below to get my thoughts.
Be sure to also scroll down for more commentary and an annotated chart.
On February 27th, I discussed a potential bullish breakout from the USDCAD.
The pair had just closed above the confluence of resistance at 1.3300.
It’s the intersection of descending channel resistance from the September 2019 high and a more significant channel top from the 2016 high.
You can see where the USDCAD tested this area on Monday with a session low of 1.3314.
The same thing is happening so far today with the pair bouncing from 1.3318.
However, there is an issue with this retest.
To be succinct, it occurred too quickly, in my opinion.
Monday’s session wiped out last week’s gains during the pair’s two-day breakout before the weekend.
It’s the opposite of a rounded retest that you want to see if you’re considering buying a market.
In other words, it signals the potential for a false break.
And if you aren’t feeling an overwhelming sense of deja vu, it means you probably didn’t see last week’s USDJPY false break at 109.80.
But it’s important to remember that those are my words only.
In the grand scheme of things, they’re meaningless.
What matters is the price action, namely whether or not USDCAD can stay above 1.3300 on a daily closing basis or not.
If it does, the rally efforts are intact, and 1.3530 is exposed.
If the USDCAD closes back below that 1.3300 region, it would confirm the false break narrative and open up targets like 1.3130.
Between the two, the false break scenario would be more appealing to me. Watch the video above to find out why that is.