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Potential long term technical setup has begun to take shape on the USDCAD. It is no secret that the trend for the USDCAD has been down for quite a while. Recently it has tested support into the mid .9600’s and has rebounded back into the .9800’s. This rebound has been challenging the daily trend line and gives us the first clue that the trend just might be changing.
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Along with the challenge of the trend line comes the break of former support in the .9850 area. As you can see from the chart example, the break of the trend line and the former support are happening at the same time. Very interesting!
Now the long term implications…..IF we continue to see support in the mid .9800’s and IF the trend line is indeed broken with an open and close on the daily chart we could see the beginnings of a head and shoulder reversal pattern. Now keep in mind that the previous support area took about 6 weeks to develop and even on the “right shoulder” we are only at the beginning stages.
I am now shifting my focus from the downtrend to buys as long as the market continues to find support in the mid .9800’s. Initial targets would be back to 1.0000. With a break of 1.0 the possibilities are great to see a new uptrend leg to test the 1.0200’s again. We will see!
