Forex Technical Update
EUR/CAD Daily Chart 11/5/2012 9:50PM EST
Double Top: The EUR/CAD is coming off a double top after it fell below 1.28 last Friday (11/2). You can say that the second top was slightly higher, but the corresponding daily RSI reading was lower, so it was a bearish divergence. Either way you look at it, there were some technical signs of a market unable to continue the rally since the 1.2126 August low. Coming off the double top also broke below the 200-day SMA and a rising trendline.
Breakdown: The breakdown of the rising trendline is a sign of reversal, with 50% retracement in sight at 1.2573. This is also a previous support pivot. If you look at this August-October rally as a 5-wave structure, Elliott Wave Principles suggest a bullish trend could be developing, but a significant correction should take place first. Both the 50% retracement target, and the support pivot, which would be the end of wave 4 are conventional targets for a correction after an impulse wave.
False break: If there is a pullback, and the market can hold under 1.2810, then the bearish outlook remains intact. Otherwise, it becomes unclear. A break back above 1.29 however suggests the breakdown may have been a false break, and in turn suggests focus to the 1.30 handle and possible further upside.
Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
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.