The USD/CAD pair fell during the week, slicing through the 1.25 handle. The uptrend line just below continues to offer support, and it looks likely that the market will continue to find buyers in that region as it has in the past. Because of this, I think that the market falling suggests that we are setting ourselves up for a very important test over the next week. I think that it is probably best to wait for the weekly candle to form, because it gives you an idea as to where we are going next. If we get a supportive candle based upon the uptrend line, the market should continue to find buyers and push towards the 1.30 level above. After all, it is a market that is completely oversold.
The alternate scenario
A breakdown below the uptrend line should send this market much lower, perhaps down to the 1.20 level next. Therefore, I am waiting for a weekly candle to close, because there is a high possibility of volatility and uncertainty in this area just below. After all, we have fallen so significantly that it’s difficult to imagine that there is anybody left to sell at this point. However, the GDP numbers for both countries came out on Friday, and both were very bullish. The Canadian GDP was better than the US GDP, so it makes sense that perhaps the sellers will be a bit more aggressive. However, we don’t have any confirmation at the trendline yet, and I think that’s what the weekly candle would give us. A bounce from here could be significant, but would need to see some type of help, perhaps the oil market rolling over. Ultimately, if we break down below the trendline the 1.20 level underneath makes a nice target.
This article was originally posted on FX Empire