USD/CAD Nearing Breakout

• Weekly and Daily: My previous post on USD/CAD came last Friday, when I mentioned the possibility of a breakout this week, from its congestion pattern. (Refer to Daily Video Technical Update 12.11.2009).
• Let’s review: The weekly time-frame shows that the 1.0500 area, or 61.8% retracement has held, although the market seemed poised to break it in October and reached 1.0200. This apparently was a clearout, as the market started to establish high lows. The weekly and daily stochastic readings are both neutral to slightly bullish.
• We see that the market is testing an intermediate price level resistance between 1.0700 – 1.0800, coincident to the declining trendline. It should be noted that in this consolidation, the price level resistance is more important, as we often see congestion pattern breakouts lead to a more complicated and wider consolidation.
• 4H: The 4H time-frame shows a completion of a bearish butterfly at 1.0750 (127.0% extended retracement). The stochastic is crossing over in the overbought zone. The downsloping trendline is “broken” but not confirmed. The anticipated near-term bearish action may give us clues to whether a break would be sustained.
• Eventually, the main level to break above for intermediate-term bullish signal is the 1.0800 area.
• If the market is supported above the 1.0650 area, then a break above is likely early next week. If the market continues to consolidate and reaches the 1.0550 level, we will need to see the market break above 1.0800 to consider the intermediate bullish outlook.
• A break below the upsloping trendline suggests short-/intermediate decline towards 1.0200.

Fan Yang
Currency Analyst
Commodity Trading Advisor

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