USD/CAD (a daily chart of which is shown) as of Monday (6/06/2011) has made a sustained bullish correction that has thus far respected a confluence of resistance that includes both a downtrend resistance line extending back to the October 2010 high, as well as the key 0.9850 area support/resistance region. This confluence was respected with a clear shooting star candle. The current bullish correction within the long-term downtrend has been in place since the early May 0.9445 low. In the event of a strong breakout above the current resistance confluence, which would potentially break the long-standing downtrend, the key upside target continues to reside around the parity (1.0000) resistance level. To the downside, in the event of a breakdown below the bullish correction’s uptrend support line, thereby continuing the entrenched downtrend, price action should begin targeting the 0.9500 region once again.
(Forex chart key: price on 1st pane, Stochastics on 2nd pane; horizontal support/resistance levels in black; uptrend lines in green; downtrend lines in red; 50-period simple moving average in orange; 100-period simple moving average in brown; 200-period simple moving average in dark blue.)
James Chen, CTA, CMT
Director of Technical Research and Education, FXDD
- Click here for my book, Essentials of Foreign Exchange Trading (Wiley).
- Click here for my book, Essentials of Technical Analysis for Financial Markets (Wiley).
- Click here for my video DVD set, High-Probability Trend Following in the Forex Market (FXstreet).