Technical Analysis USDCAD : 2014-08-25


Good afternoon, dear traders. The key event of this afternoon is the release of New Home Sales, 16:00 CET. The indicator is released by the US Census Bureau on a monthly basis and measures the sales increase of built homes per family. This indicator is considered to be the leading indicator of the US economic development, as it has a multiplicative effect on various economy sectors: mortgage loans, insurance premiums, secondary demand goods (furniture, electronics, etc.). In addition, it should be noted that the values are expressed relative to the last year data, and therefore, it is analyzed by long-term investors with utmost care. We can assume that a discordance with the predicted values of New Home Sales may affect the strengthening or weakening of the American currency against other liquid instruments in the Forex market.

technical-anaysis-usd-cad

Here we consider the USD/CAD behavior on the D1 chart. The price formed the first bearish signal - the double top model, which is circled in red on the chart. RSI-Bars leading indicator is also showing a bearish divergence: we are witnessing the formation of the descending channel. Conservative traders will get the final confidence in the trend only after the oscillator level intersection at 51.9184%. We suppose that this occurs simultaneously with the fractal support breach at 1.08491, which can be used to open a pending sell order. The position is quite comfortable, as the level is further supported by the lower DonchianChannel boundary, and the ParabolicSAR historical values. The preliminary risk limitation is recommended to be placed above the new resistance at 1.09900. This level is confirmed by the Bill Williams fractal and also the historical values of the two trend indicators.

Note that the Canadian dollar trading volumes confirm the new trend formation. The daily volumes of futures and options traded on the Chicago Mercantile Exchange are presented on the chart below. We can see that the volumes form a weak uptrend. We will expect the final confirmation after overcoming a new high of 60,000 contracts. You can monitor the trading volumes for this currency pair by clicking here.

After position opening, Trailing Stop is to be moved after the ParabolicSAR values, near the next fractal trough. Thus, we are changing the probable profit/loss ratio to the breakeven point.

PositionSell
Sell stopbelow 1.08491
Stop lossabove 1.09900

Dear traders. You can see the detailed report of the author’s account by clicking here.

Note

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