The USDCAD is looking to take back all the gains seen from the sharp rise on Friday and continuation run higher in the Asian session today.
Recall from Friday, the pair found support buyers against the swing low from June 28th near 1.28185. The low price reached 1.28214 and started the run higher.
That move to the upside saw the pair take back broken levels/areas including:
- 1.2837 to 1.2842 swing area
- 1.2853 to 1.28584 swing area
- The 100 hour MA (blue line)
- A wider swing area between 1.28929 to 1.29073, and yet another
- Swing area between 1.29287 to 1.29363.
Those areas were not unusual given the up and down price action that formed the original bottom from June 27 to July 4th along with the trading that took place during last week. There were consolidation within the same area, but clear swing areas were established that led to the roadmap higher on Friday (the levels were broken leading to more buying on the breaks), and the roadmap lower in trading today (the level were broken leading to more selling).
What did not happen on Friday and again today, is the price could not get above the 200 hour MA (green line in the chart above – currently at 1.29502) or the 38.2% retracement of the move down from the July 14 high (at 1.29747).
The inability to get above THOSE levels, followed by the re-breaking of the aforementioned levels, have led to more selling as the buyers were disappointed, and an increasing number of buyers turned back to sellers.
I spoke to the USDCAD in a video on Friday which was spurred on by a trade recommendation from Bank of America. At the time the price was trading around 1.2863. I agreed with their trade as the price had moved from the low in June, had broken above 1.2842 and 1.2858. Indeed the price action continued higher on Friday, moved higher again in early trading today and peaked at 1.2934.
However, the 200 hour MA remained elusive, and that disappointment started the run back to the downside.
What next?
Needless to say the lows down to 1.28185 if broken would open the door for further selling.
If that does not happen, we are back at the very beginning of the hold on Friday where the price had to “take back” the swing levels once again. They don’t go away. They just become harder hurdles to get back through given the failure on the first attempt.