The USDCAD trended higher through September (see chart below), but the buyers ran into a ceiling in early October. Three separate highs between October 5 and October 14 stalled near 1.4291–1.4298. The buyers had their chances to extend the trend. They could not get through.
That inability to break higher opened the door for sellers, and the subsequent move lower was quick and directional. The decline continued until October 23, when the price reached 1.3968.
That low stalled just above an important swing area between 1.3948 and 1.3963. The 61.8% retracement at 1.3948 added technical significance to the support zone. Sellers took back a large portion of the September rally, but they could not push through that next downside target.
Yesterday’s break above the 100-day MA failed
The bounce from last week’s low took the price above its 100-day moving average yesterday, currently at 1.40447. However, the break could not be sustained. Buying momentum faded, and the price rotated back to the downside.
That failed break matters. Getting above a key moving average is one step. Staying above it is what gives traders more confidence that control is shifting.
Yesterday, the buyers could not complete that second step.
Buyers make another push from a narrow range
Today, the price initially consolidated mostly below its 100-hour moving average at 1.4018. More recently, buyers have extended the narrow trading range higher, moving back above that moving average and away from the 50% midpoint at 1.40149.
That gives the buyers a short-term foothold. The 1.40149–1.4018 area now becomes close support and a risk-defining zone for traders looking for the recovery to continue.
Stay above it, and the buyers can keep probing higher. Move back below it, and the latest upside break starts to lose its technical backing.
The 100-day and 200-hour MAs are the next tests
The immediate question is whether the price can get back above the 100-day MA at 1.40447—and stay above it.
A sustained break would give the buyers more confidence and shift attention toward the falling 200-hour MA at 1.40678. Getting above that moving average would clear another hurdle and strengthen the bullish recovery.
Until those levels are broken, however, the rebound still has work to do. Sellers have technical levels against which they can lean and define their risk.
A move back below support would put sellers firmly in control
Conversely, if the price stalls below the overhead moving averages and rotates back below 1.4018 and 1.40149, sellers would regain firm control.
That would put the October 23 low at 1.3968 back in focus, followed by the more important 1.3948–1.3963 swing area. A break below that zone, including the 61.8% retracement, would open the door for another extension lower.
For now, the buyers are making a play. Holding 1.40149–1.4018 keeps that play alive. Breaking and holding above 1.40447, followed by 1.40678, would give it more credibility.
Below is the technical ladder for traders in the USDCAD.
This article was written by Greg Michalowski at investinglive.com.