May 20, 2008 06:23

Technical Analysis – Sharp USD/CAD decline expected

Posted In: Technical Analysis
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6:18a GMT – USD/CAD has been consolidating in a tight horizontal channel now for the second day after the 100 pip drop from 1.000. Due to the declining trend lines, the declining RSI hourlies and the nice horizontal line that the candlesticks are forming along the 0.9900 support I expect the pair will break through. Look for .9975 and then .9950 as the next support levels ( support back in early March).

Trading idea: place an entry sell order 10 to 15 pips below the support level at 0.9900 with targets around the .9950 range.

UPDATE – 8:01a GMT – after a 31 pip decline to .9875 the pair rebounded sharply and produced a bullish engulfing candlestick all the way back up to .9920. This is why breakout orders on the USD/CAD make me nervous ;)

Weekly update – Pair did drop to .98770, a 31 pip decline from where the pair was at the time of analysis. ATR was about 15.7 with a 3 pip spread so a stop/L1 of 20 would have been sufficient, meaning this would have been a profitable trade of +20 pips at least. On this pair, in a strong downtrend I would much prefer buying on rallies though, as the trades have a much higher chance of hitting my L2 and L3 meaning the money management scenario is way better.

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