Overview:
Since bulls have pushed further above the upper limit of both depicted bullish channels and the 79.6% Fibonacci level, the market looks quite overbought.
However, bullish pressure is still expressed as the previous weekly closure above 1.2550 (consolidation zone mid-line).
Successive lower highs were established within the wedge pattern. However, the market expressed a bullish breakout above 1.2550-1.2600 shortly after.
The market failed to hold above 1.2650 - 1.2680 (previous highs) resulting in the formation of a double-top pattern that calls for confirmation (daily closure below 1.2350).
On the other hand, the support level around 1.2350 (lower limit of the wedge pattern) and 1.2300 (79.6% Fibonacci level) have been providing support for successive weeks on the daily and weekly charts.
In the long term, a projected target for the USD/CAD wedge pattern would be located near the level of 1.3050 (the origin of the last bearish swing initiated on March 2009).
The recent weekly candlestick indicates bearish rejection at retesting of the weekly resistance at 1.3000 (a Shooting-Star weekly candlestick around the upper limit of the consolidation zone).
On a daily basis, as long as the USD/CAD pair keeps trading below 1.2550 (Intraday support level), a quick bearish decline towards 1.2350 should be expected (significant Fibonacci level and the lower limit of the wedge pattern).
Trading recommendations:
For conservative traders, the level at 1.2550 is likely to offer a valid sell entry with T/P at 1.2350. S/L should be set as daily closure above 1.2560 again.
Risky traders can wait for a confirmed bullish breakout above 1.2550 for a continuation buy entry. T/P at the levels of 1.2740, 1.2800, and finally 1.3000.
The material has been provided by InstaForex Company - www.instaforex.com
