By: Dima Chernovolov This technical analysis report is based upon a trade opportunity taken from Autochartist’s Market Reports.   Autochartist recently identified the Inverse Head and Shoulder chart pattern on the 4-hour USD/CAD charts – as you can see from the following trade opportunity alert for this currency pair. USD/CAD is expected to rise to…

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Canada’s CPI data for March came in at 0.6% on the month and 1.5% on the year. The forecast around 0.4% for the monthly rate, and 1.4% for the annual rate. Although not at the 2.0% target, the inflation rate in the past 3 months (Jan: 0.3%, Feb: 0.8%, Mar. 0.6%), eases any deflationary risk concerns. The annual rate also rebounded from the 1.1% in February, so it was a good sign that inflation stabilized and is working back towards the 2.0% target…

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USD/CAD has been bearish all week, until it found support at 1.0858, then completed an inverted head and shoulders pattern seen in the 1H chart. From this push, we can see some upside risk toward the 1.10-1.1010 area, which is a support/resistance pivot zone. Just below 1.10, you can also see a falling trendline that has kept price bearish in the short to medium term, since the 1.1277 high on Mar. 19…

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EUR/USD edged lower this week, continuing a bearish mode since it retreated from the 1.3966 high in March. The ECB event risk on Thursday weighed on the euro because the ECB remained dovish. When we look a the daily chart , we see that the bearish run in the past few weeks is within a bullish market. There is still downside risk toward the 1.36 handle, where the 200-day SMA looms. However, with the daily stochastic below 20, I would not be surprised if we get a bullish attempt early next week even before 1.36…

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The key event risk today was ECB’s monetary policy statement and the press conference that followed. While the bank announced so change to its policy, it did mention that it had more discussion of QE, and it did expect a prolonged period of low inflation. This basically keeps the hope alive that the ECB will still reduce rates or apply some other method of loosening policy. The market traded down the euro. We saw the EUR/USD crack this week’s low…

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Real GDP in Canada grew 0.5% in January, rebounding from a 0.5% decline in December. Before that, there were 5 consecutive months of growth. In January, Manufacturing activity was the main contributing factor to the growth, while “agriculture and forestry” was the main drag. (Source: Statcan) The persistent growth since 2009 is a welcoming trend  for the Canadian economy, and also a factor that should allow the BoC to end its loose monetary policy sooner. This should be CAD-positive, and the market is so far reacting that way. USD/CAD Falls: USD/CAD for example returned to last week’s low of 1.10. This price action threatens to extend an already sharp decline from the March and 2014 high of 1.1277.  A break below 1.10 opens up 1.0955 and 1.0910 lows in the short-term. A break below 1.0910 would open a bearish market in the medium term, reversing the prevailing bullish outlook that has been developing since Sept. 2012. (USD/CAD 4H 3/31) Bullish scenario: If the market holds 1.10 and pushes USD/CAD above the 1.1077 pivot, we can look for a near-term bullish outlook toward the 1.1150 pivot, or 1.1171, 61.8% retracement. This scenario would also maintain the prevailing bullish outlook, the one that has been developing since Sept. 2012. CAD/JPY Extends: Another theme today has been risk appetite, and therefore a weak JPY across the board. CAD/JPY therefore has double the fuel to extend its already bullish swing. When you look at the 4H chart, you see a market in consolidation since the beginning of February. This consolidation followed a sharp bearish swing that started on Jan. 1 2014 from 99.15 to 90.65 by Feb. 3. (CAD/JPY 4H chart 3/31) Price is attacking the consolidation resistance area. A break above 94.10 would essentially complete a double bottom, and suggest an attempt to revisit the 2014 high around 99.15. With the 4H chart showing overbought condition, we should anticipate some near-term resistance around 94, or some pullback if 94.10 is broken by the current swing.   Fan Yang, CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes. Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.

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You can read more about this trade and others on my personal trading blog. CAD has been in quite the downtrend, making it one of the best trades in the forex market for trend traders over the past few months. For those who missed out on that opportunity — a group that I’m in — now may be a time to buy the dip. The market has pulled back to its 50 SMA, which coincides with a 50% Fibonacci retracement level, and is showing signs of forming a support level. With that in mind, I entered a trade. The chart below illustrates. I may revise my target profit point based on Fibonacci extensions, but targeting 1.13 still gives me a reward/risk of 3:1, so it’s acceptable for now. This image has been resized. Click this bar to view the full image. The original image is sized 1184×705.

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