The USDCAD has spent most of the trading times since September 23 between 1.3543 to 1.38375. Yes, there was a move lower on October 4 and into October 5. There was a move above earlier this week on Tuesday. Both breaks were relatively modest before rotating back into the range.
Then today came along and there was a break and run to the upside. The move too the pair racing to the upside an all the way to 1.3977. That is a run of 140 pips above the upper extreme.
However, we know the result.
The buyers turned to sellers. Technically levels were broken on the downside that should not have been broken. When the price fell back into "the range", there was more selling.
Please see my video HERE for my prelude to the sharp reversal lower. For the USDCAD discusssion go to 1:15 in the video.
That selling has now taken the pair to - and through - the 100 hour MA (blue line in the chart above), and then down to the 200 hour MA (green line in the chart above) at 1.37098 currently. The low just bottomed at 1.37061. There has been a modest bounce off the MA.
What now?
Going back to last Friday, the low price on that day also found support buyers against the 200 hour moving average. That increases the levels importance going forward. Hence the buyers willingness to lean against the level.
Putting it simply, risk can be defined and limited against the 200 hour moving average. If the price were to break below with momentum, dip buyers could sell and take a small loss. Conversely the dip buyers against the level are hoping that the USDs move back to the upside is reignited.
What might that look like?
Getting back above the swing level between 1.37526 at 1.37657 would be step 1 that area held resistance last Thursday last Friday and on Monday before extending to the upside. During trading yesterday, the area also held support (helped by the support buyers against the 100 hour moving average as well – blue line)
Get above that swing area and the 100 hour moving average 1.37831 would be the next target to get to and through. Move above that level and traders will be talking once again about the 1.3807 – 1.38375 swing area.
So buyers are stick a toe in the water after the sharp move to the downside.
The roadmap back higher is defined. It is up to the market traders to see if the sellers can now turn back buyers
