USD/CAD on Cusp of Major Rally?

Last updated 9/21/2009 2:34 PM EST (GMT -5) 6 Comments

FX360 Technical Analyst Staff

Technical Analyst, GFT

The USD/CAD rally we're seeing to start off the week does not come as a huge shock as we saw a solid bullish butterfly pattern complete at weekly 61.8% resistance. Prices are currently testing 78.6% resistance of the recently completed CD leg (purple) while also flirting with a 6-mo. bear trendline. Although we're too late to enter off the bullish butterfly pattern completion it serves as a good example of how multiple time frame analysis can help to tilt the scales of probability a bit more to our favor. Be that as it may, upcoming price action may be quite useful in helping to determine what the future holds for the USD/CAD...

Resistance...

A move above 78.6% resistance near 1.0853 would point to a bullish continuation to 127.2%-161.8% extensions of current CD leg near 1.1016-1.1133. A rise beyond these levels may point to a more significant shift in trend which is a distinct possibility as prices may be bouncing of that more significant/major 61.8% weekly resistance (1.0586).

Support...

Should 78.6% resistance (1.0853) hold and prices begin to drop this week, we will keep an eye out for bullish patterns to develop. Because the USD/CAD has been in a 6-mo. downtrend new lows would suggest that bearish momentum is intact, so an argument can be made for further losses especially if prices dip below that weekly 61.8% support near 1.06. However, there is still a bit room down to 1.0516-1.0480 in which case would have a dual/intertwined bullish butterfly pattern completion. A move down to this level might provide the type of whipsaw that tends to appear before a more significant trend/swing reversal is underway.

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Comments (6)

HT

September 21, 2009 at 03:19 PM ET

Hi Roger,
Excellent analysis...wow! So, 1.0853 is the pivot and if it doesn't hold at 1.0853, which it appears, the next down leg will be 1.05 region and then there will be a bounce back. It looks like this pair is declining in a lower, low pattern. The bear trend seems still intact.
Keep up the great analysis and inform us.
Thanks, Roger.

HT

September 21, 2009 at 03:20 PM ET

Hi Roger,
Excellent analysis...wow! So, 1.0853 is the pivot and if it doesn't hold at 1.0853, which it appears, the next down leg will be 1.05 region and then there will be a bounce back. It looks like this pair is declining in a lower, low pattern. The bear trend seems still intact.
Keep up the great analysis and inform us.
Thanks, Roger.

HT

September 21, 2009 at 03:20 PM ET

Hi Roger,
Excellent analysis...wow! So, 1.0853 is the pivot and if it doesn't hold at 1.0853, which it appears, the next down leg will be 1.05 region and then there will be a bounce back. It looks like this pair is declining in a lower, low pattern. The bear trend seems still intact.
Keep up the great analysis and inform us.
Thanks, Roger.

wrtm_19

September 21, 2009 at 04:50 PM ET

Hi Roger,

I see in the 4hr chart price is getting to D (1.0855). Do you think that point is a valid reversal point?.

Regards.

rstojsic

September 22, 2009 at 01:35 PM ET

yes sir

wrtm_19

September 22, 2009 at 11:54 PM ET

Thanks!

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