On Tuesday I wrote an article noting the bullish wedge breakout on the USD/CAD and suggested traders look for any pullback before trying to chase this for any LONG trade. The pullback has now evolved and this is what I’m currently looking for.
USD/CAD daily: Price action made a daily chart bullish breakout from the three-month wedge pattern on Monday. I suggested traders look out for any pullback to test either the broken trend line or the key 1.30 level and, so far, price has pulled back to the broken trend line.
USD/CAD 4hr: the 4hr chart shows that price action looks to have started to bounce back up from the test of this trend line BUT I don’t have any supporting momentum for me to be confident of any LONG just yet. Note how the ADX and both DMIs are below the 20 threshold. There is BoJ news today and talk of potential stimulus which, if it evolves, could boost the US$ and flows could strengthen this pair too. Any disappointment with BoJ stimulus though could weaken the USD/JPY and flows could then weaken this pair. Thus, my preference is to wait until after this BoJ news and to look for any new momentum based TC signal.
I do note that a 61.8% fib pullback of the recent swing high move would bring price down further and to the 1.30 S/R level and 4hr 200 EMA. Thus, I’m still on the lookout for any potential deeper pullback to this major area and any BoJ ‘disappointment’ could assist such a move:
Summary: Price action has pulled back on the USD/CAD as I suggested. The pullback, thus far, has been to the broken trend line but I am still looking for any potential for further weakness to test the confluence area near 1.30. Some technical traders would jump in LONG simply on the basis of this recent trend line test but I will watch for any new 4hr chart TC signal on the USD/CAD before considering any new trade.