USDCAD Should Give us a Nice Signal Soon

Sellers on the USDCAD had a great chance to start a new strong downswing. Unfortunately for those that were expecting that, they failed to break the long-term up trendline and most probably, now they will have to pay the price for that.

Long-term sentiment here is negative. It was created in the first half of the 2016, when the price fell sharply over 2200 pips. After that, we got a year long recovery, which technically in the short-term can be called ‘channel up’ (bullish) and in the longer-term ‘flag’ (bearish). The difference between them focuses on the lower line of this formation. If we would see a bearish breakout that would mean flag. If we would see a bounce, that would mean a channel up. So what price action trader has to do is to wait. Wait for the price action to show us the direction. Yesterday, the price created the small pennant (green) above the support. In theory that indicates a willingness for a breakout but we can see that this is not happening. As long as we stay below the 38,2% Fibonacci it is still to early to claim the successful defence and a bullish victory. The possibility of a breakout is still high.

How to trade it? Best way in my opinion is to wait for the confirmation. Price breaking the lower red line will be a negative signal. Price breaking the 38,2% Fibonacci should be perceived as a positive one. That should be a good trading setup and all we need now is to wait and let the price choose the side.

This article is written by Tomasz Wisniewski, a senior analyst at Alpari Research & Analysis