For many frequent traders, it’s surprisingly easy to get caught up in the day-to-day fluctuations of the market and lose sight of the longer-term trends. For that reason, successful short-term traders make it a regular practice to take a step back and look at longer-term charts at least once a month. As we roll into August, it’s worthwhile to go through this process and analyze the key medium-term levels to watch on the USDCAD, especially ahead of a data-heavy week in Canada.
Even a cursory look at the weekly chart shows that the pair has been in a prolonged uptrend off its September 2012 low near .9600. After the July bounce, rates have now found support at this trend line five separate times, showing strong buying pressure along this dynamic level of support. In general, longer-term technical levels and indications tend to be stronger than shorter-term ones, so it’s not surprising that this multi-year bullish trend line led to a break of the four-month bearish channel off the March high.
The secondary indicators also confirm a return to the longer-term bullish momentum. For one, the RSI indicator found support at the “40” level and broke out of its corresponding bearish trend line last week. At the same time, the lagging MACD indicator has started to turn higher off the “0” level and may cross back above its signal line as soon as next week. The fact that the pair only saw a shallow 38.2% retracement over the last few months likewise shows that longer-term buyers still have the upper hand.
While the technical picture is fairly bullish, it’s important to note that this is a weekly chart, so a pullback over the next week or two cannot be ruled out. That said, as long as rates hold above the longer-term bullish trend line (currently at 1.0700) swing traders may want to focus on buy trades. To the topside, rates are testing near-term resistance at 1.0950, but a break above this barrier could open the door for a run toward the 2014 highs above 1.1200 in the coming weeks.
Source: FOREX.com
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