Hello traders! Over the course of the last 42 days, USD/CAD has formed a triangle pattern. Price has been rejecting the downtrend trendline as well as the 1.3855 support level.
What we see today is a potential breakout to the downside where the price is currently trading below the 1.3855 support. Nevertheless, USD/CAD has approached 127.2% Fibs at 1.3834, which could be the critical support level. This makes an area between 1.3834 – 1.3855 a strong field for the battle between sellers and buyers.
It will be very important to see if USD/CAD will manage to close the day below the 1.3834, in which case the downtrend is likely to be confirmed. On the other hand, if the support area holds, USD/CAD should be expected to move up once again. The resistance is seen at the breakout point of the 200 Exponential Moving Averages, which is 1.4000. Not only this is a technical but also a strong psychological resistance level, which also corresponds to the downtrend trendline.
The RSI oscillator shows that price has approached the support once again, and it is also trading within the triangle pattern. Although, while USD/CAD rejected the downtrend trendline, RSI broke above the downtrend trendline, suggesting that there is still more buying power at this stage.
In regards to the downside pressure, only if price breaks and closes below the 1.3834 support, and RSI will do the same, USD/CAD is highly likely to initiate an impulsive wave to the downside. But as long as support holds, the consolidation phase will remain valid.
Bias: Sideways while above 1.3834
Potential Support Zone: 1.3834 – 1.3855
Potential Targets: 1.4000
Have a profitable trading!