A bullish breakout above the previous consolidation zone between 1.2400 and 1.2800 was performed on July 15 (shown on the weekly chart).
A significant bearish rejection was observed around 1.3450. Hence, another consolidation range was established from 1.3450 down to 1.2800.
On December 7, a bullish breakout above 1.3450 (the upper limit of the recent consolidation range) enhanced the bullish side of the market. Hence, a bullish visit to the resistance level at 1.4120 (Fibonacci Expansion 100%) was executed.
Bullish persistence above 1.4150 enhanced the bullish side of the market towards 1.4650 (141.4% Fibonacci expansion) where an evident bearish rejection was expected (bearish engulfing weekly candlestick).
The 1.4120 level (Fibonacci Expansion 100%) stands as a significant key level to be watched for further price reactions.
Although the price zone of 1.3170-1.3250 was expected to offer bullish support for the USD/CAD pair, temporary bearish breakdown of the same price zone can be seen on the daily chart.
This price zone corresponds to the depicted weekly uptrend line and the upper limit of the previous consolidation range (prominent breakout level).
Previously, the 1.2975 level (61.8% Fibonacci level) stood as a prominent support level which provided significant bullish rejection and prevented further bearish decline.
On the other hand, the 1.3300 mark constitutes a significant resistance level as it corresponds to the 50% Fibonacci level and the backside of the broken weekly uptrend where a valid sell entry was suggested on March 24.
That's why, the USD/CAD pair will remain trapped between 1.2975 (61.8% Fibonacci level) and 1.3300 (50% Fibonacci level) until breakout occurs in either direction.
Conservative traders should wait for a daily closure below 1.2975 (61.8% Fibonacci level) to sell the USD/CAD pair. Initial T/P levels should be located at 1.2770 and 1.2550.
The material has been provided by InstaForex Company - www.instaforex.com