The USDCAD formed a double top near 1.42984 last Wednesday before sellers took control. Over the next five trading days, the pair fell to a low of 1.4032—a decline of about 266 pips.
That move took the price below its 100-day moving average near 1.4041 yesterday. However, sellers could not sustain the break, and the price rebounded. They had their shot below a key technical level. They missed.
In the Asian and European sessions today, sellers tried again. The price dipped below the 100-day moving average, now near 1.4042, but only reached 1.4039 before bouncing back above it. A second attempt below the moving average also failed to find follow-through selling.
Today’s rebound developed more momentum than yesterday’s, taking out the early Asian session high and extending toward the broken 38.2% retracement and swing level at 1.40818. The high reached 1.4081, where sellers leaned against resistance. The pair has since rotated back toward 1.4066.
Buyers and sellers have now defined their levels.
On the downside, the 100-day moving average at 1.4042 remains the key barometer. Buyers have defended that area on two consecutive days. Staying above it keeps the recovery attempt alive. A sustained break below would shift the bias back toward the sellers, with the lows at 1.4039 and 1.4032 ahead of the 50% midpoint at 1.40149. Get below that midpoint, and the door opens for further selling.
On the topside, the 1.40818 retracement and swing level is the hurdle. Sellers have shown they are willing to defend it. Buyers need to get above—and stay above—that level to strengthen the recovery and open the door toward the falling 100-hour moving average near 1.4112.
The lesson for traders is that a break needs follow-through. Moving below the 100-day moving average gave sellers an opportunity, but the quick recoveries showed they could not maintain control. Buyers have earned some breathing room, but they still have work to do at 1.40818.
For now, support is holding below and resistance is holding above. Traders are waiting for the next shove.
In the video above, I take a look at the USDCAD’s decline, the failed breaks below the 100-day moving average, and the levels that will help determine whether buyers can extend the recovery or sellers regain control.
This article was written by Greg Michalowski at investinglive.com.
