Technical Analysis USDCAD : 2014-07-28

Good afternoon, dear traders. The key event of this afternoon is the release of the monthly CB Consumer Confidence (at 16:00 CET) in the U.S. This indicator provides an estimate of consumer spending growth, and is based on consumer surveys. The index evaluates implicitly the availability of manpower, business-friendly environment and economic conditions. Therefore, it is necessary to focus on the market of the U.S. currency during the period of this particular indicator release. Its data is analyzed by long-term investors with utmost care, and therefore it may affect the strengthening or weakening of the U.S. currency.


Here we consider the USD/CAD behavior on the daily chart. RSI-Bars leading oscillator made the correct reversal near the bearish trend line and defined a new growth phase of the price. The last indicator bar renewed its high, breaking the resistance line at 55.70772. We expect the graphical model to be repeated on the price chart, especially as the ParabolicSAR trend indicator has already reversed towards the green zone. The second last price bar crossed the DonchianChannel resistance upwards, and strengthened the confidence in the movement direction. A long position can be opened immediately in the vicinity of the mark at 1.07970. Conservative defense position is based on the fractal support at 1.06125. It is confirmed by the lower boundary of 30-day DonchianChannel, and its fractal. Stop Loss is recommended to be placed at this particular mark.
It should be noted that the increasing trade volumes confirm the onset of bearish momentum. Thus, the daily volumes of the USD/CAD futures and options trading on the Chicago Mercantile Exchange are presented on the chart below. Both instruments are derivatives, and can be used to assess trends of the Forex spot market. We see that the downtrend turning point coincides with the beginning of a new price uptrend. Trading volumes confirm the pricing model according to one of the tenets of Charles Dow.

Little probable, but possible, that this breach proves to be false and the upward momentum will be eventually weakened. In this case, we expect the price return in the daily trend channel. Short position can be opened below the support at 1.06125. After position opening, Trailing Stop is to be moved after the ParabolicSAR values, or near the next fractal trough (long position), or peak (short position). Thus, we are changing the probable profit/loss ratio to the breakeven point.

Buy stopabove 1.07970
Stop lossbelow 1.06125

Sell stopbelow 1.06125
Stop lossabove 1.07970


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