The USDCAD is higher today as the U.S. dollar firms across the board. The pair tested trend line support on Friday and also appears to be carving a falling wedge pattern on the 4-hour chart.
However, despite the bullish pattern above, there is still a key resistance area just above the current price. The 1.2770/5 area will likely attract sellers if this falling wedge breaks to the upside.
Last Tuesday we looked at the USDCAD as it spiked above the 1.2770 area intraday. The idea was to wait until the 5 pm EST close before making a decision.
Because buyers failed to breach the 1.2770 area on a daily closing basis, I remained on the sideline. The region represents the August high and was a key pivot last week as the USD pulled back into trend line support.
Although you could trade the 4-hour wedge above, it may not be the ideal approach. Resistance at 1.2770 is too close to the current price to secure a favorable risk to reward ratio.
Moreover, the uncertainty surrounding the greenback’s future direction is too high to play this on an intraday time frame. Of course, that’s just my opinion, but I’ve found the daily chart to be a much better barometer of future prices during times of indecision.
With that in mind, I’m back to waiting to see what happens at 1.2770/5. A daily close at 5 pm EST back above the level would suggest a resumption of the rally that began in mid-September.
It would also expose the current November high near 1.2915 followed by the October 2016 and February 2017 support area at 1.3000.
The one thing going for USDCAD bulls that wasn’t present last week is Friday’s retest of trend line support at 1.2700. With prices reset, buyers have a better chance of breaking through the 1.2700 area.
On a broader note, we will likely see the USD consolidation continue throughout the week. That is until there is some form of resolution to the U.S. tax bill or preliminary headlines start to break.
So as I mentioned to members, it might be a good time to stay patient and preserve capital.
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