USDCAD bears are on the move for the fifth straight day. The pair has pierced range support at 1.2670 on the intraday time frames, including the 4-hour chart.
We’ve had our eye on this 240 pip range since December 6. At the time, the pair had just formed a bullish rejection candle and was bouncing from the 1.2670 handle.
A few days later, USDCAD sellers defended the range top at 1.2910. They eventually succeeded in pushing prices lower, particularly last Wednesday’s 90 pip decline.
The key to this pattern has been a daily close (5 pm EST) below support or above resistance. So far, neither of those have occurred. That has left me on the sideline for the last three weeks.
Even today’s price action hasn’t given us a signal just yet. Notice how the session on December 5 also dropped below 1.2670 on an intraday basis, but buyers stepped in to close the day back above range support.
Will today do the same?
We’ll have to wait and see. If today’s session does close (New York 5 pm EST) back above 1.2670, we could have another bullish rejection candle on our hands. It would keep the 240 pip range intact and also maintain pressure on the range top at 1.2910.
If on the other hand, USDCAD bears manage a 5 pm EST close below 1.2670, it would signal a range break and expose the next key support at 1.2420.
However, due to thin trading conditions and the December 5 low, I will require bearish price action on a retest of 1.2670 before considering an entry. It would also help ‘reset’ things given the considerable distance between the current price and the 10 and 20 EMAs.
But first sellers need to produce a sub 1.2670 close today. If they don’t, all bets for a move lower are off. I’ll be on the sideline until a favorable opportunity presents itself.