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Pair approaches critical resistance level
Wed, Jan 27 2010, 17:02 GMT
A quick view of the daily chart shows this pair is in a downtrend, and a very large descending triangle formation has been developing since April 09. The pair is once again testing a very important resistance level (the top border of the descending triangle) which has held firm on a number of occasions in the past. However, traders should be aware of the break out which occurred on 06.22.09, when this trend line was taken out forcing many shorts to cover positions. A doji candlestick recently formed on 01.25.10, showing indecision in the market as traders look for clues as to which way this pair is heading. If US Dollar bulls are able to push price up through this crucial resistance level, we could see accelerated buying to the upside (similar to 06.22.09) as shorts will be forced to cover their positions which may take price up near the 1.0709 area. A confirmed break through of a resistance level with this much importance could be a trend changer. RSI is now facing critical resistance at the 60 level, should it hold a negative RSI reversal may form as sellers step back into the market. Traders should look to be patient on this pattern to protect against any false breaks before establishing positions (either long or short). One final note, should this resistance level hold true we believe price could retrace back to the previous double bottom area (1.0240) formed on 10.14.09 and 01.14.10.
USD/CAD (01.17.10 – 01.22.10)
2.719% (1.0296 – 1.0576)
Entry (Sell Short -1.0509), Exit (Buy – 1.0670)
1.0576, 1.0626, 1.0709
1.0546, 1.0465, 1.0407