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USDCAD Leans on Twenty-Six-Month Support at 1.2820

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USDCAD broke a significant level last month. The August 11th close below the 1.30 handle confirmed the bear flag pattern and set the pair on course for a retest of the current 2016 low at 1.2460.

However, after nine straight days of losses, the pair managed to find a bid near 1.2770. The next nine days resulted in a 370 pip recovery, but buyers ultimately fell short of overtaking former channel support (new resistance) at the 1.3120 handle.

The bounce at 1.2770 seems out of place until we look back to the July 2014 low at 1.0620. Using the level as a starting point, we can clearly see that the trend line below assisted with the August 19th recovery.

USDCAD trend line

Even today’s rally is the result of buyers taking advantage of this long-term trend line. Although I should point out that it also intersects with the key horizontal level at 1.2842, which I mentioned in last month’s commentary.

I’ll be sitting on my hands until the pair manages to break free from this range. But a close below the twenty-six-month trend line could produce an opportunity that’s well worth the wait.

A break lower would likely encounter support at 1.2678 followed by the current 2016 low at 1.2460. Alternatively, it would take a close back above former channel support near 1.3200 to reverse the bearish bias.

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USDCAD confluence of support

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