6 reasons to watch this USDCAD support resistance zone
A defining zone for USDCAD trend
This is a good 6-month support resistance zone that goes back to February. In terms of duration and number of price action, it is a significant one.
What are the implications?
- As long as price stays inside the zone, scalpers can probably trade sideways until price emerges exits the top or bottom decisively.
- For swing traders looking at the daily chart like I do, chart pattern over the past few days look suspiciously like a double top. Unfortunately to be a double top, price has to break down the lower band of the zone because this is where the neckline is. (A neckline for a double top is a horizontal line we drawn at the valley between the two tops. Until the double top is confirmed, it could as easily change into channel (body of flag) here. Reversal chart pattern can quickly become continuation pattern if one does not wait for confirmation.
Great but what is the trend bias for this pair?
We can’t just sit on the fence. There must be one side of the picture that we are more interested in and that’s where we will be looking out for a trade setup and signal. This is the ‘trend bias’. Trend is something very important that I wrote about in this comprehensive post “USDSGD price action: step by step guide for new traders“. Traders can become mired in many time frames but the crucial ones are the higher time frames.
USDCAD’s trend based on the daily chart or month-month trend is down. Following this trend strictly, the trend bias for USDCAD should be down which will point to the potential double top as a bull-trap when it is confirmed. What is the best way to confirm?
Since it is an analysis based on the daily chart, rely on signal based on daily close only.
Director, TerraSeeds Market Technician Pte Ltd. Trader, investor. @sohtionghum was picked ‘Top 70 Forex Twitter in 2015’. Operates multiple strategies.
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