USDCAD suggests a multi-month low is in play

Following poor jobs data from Canada and USDCAD's most single bullish close in over 4-months, it suggests the tide may be about to turn.

SUMMARY

- 2012 bullish trendline remains intact with a Morning Star Reversal pattern on W1

- We may have seen the 'sentiment' extreme highlighted the previous article; IN which case expect the bulish trend to resume

- Next targets remain 1.0758 and 1.080-10; However this is still within potential bullish wedge and may see the patern continue to unfold

We highlighted the COTS positioning, and made the argument for a 'sentiment extreme' which if correct, meant too many traders were on the same side of the market and a reversal was on the cards. The Week closed with a Morning Star pattern, a 3-week bullish reversal, to confirm the 2012 trendline remains intact and suggest a multi-month low has been formed.

Of course any break below the trendline could be taken as a bearish signal, for now at least it appears set for continued gains above the 1.062 swing low.

The next resistance on W1 is the 1.08-81 zone, which if done soon enough would still leave us within a bullish wedge pattern highlighted, and the potential for a recycling low towards the bullish trendline/1.70 before a bullish breakout. Until confirmed this merely remains a potential scenario.

Momentum remains bullish on the lower timeframes and Friday’s breakout has confirmed double bottom which projects a target around 1.08-81.

We have seen price trade sideways and the bias is for minor retracements at most before continued gains towards 1.0758 due to the impulsive nature of the preceding breakout.

However if we see a deeper retracement then 1.70 is an on obvious level of support to c consider buy-setups. A break back below 1.70 would see me step aside and wait for the further directional cue.