(Price on 1st pane, Slow Stochastics on 2nd pane; horizontal support/resistance levels in yellow; uptrend lines in green; downtrend lines in red; 50-period simple moving average in light blue.)
Price action on USD/CAD (a daily chart of which is shown) has entrenched itself in a horizontal, converging consolidation. Bounded in a triangle-like formation by an uptrend support line on the bottom and a downtrend resistance line on the top, the pair is poised to make a substantial directional move. From a technical perspective, the bias is toward a downward continuation.
At the current juncture, price is riding the uptrend support line (extending from the late-September low) that represents the bottom border of the triangle-like formation. Any substantial breakdown of this line should target further support in the key 1.2100 price region. Oscillators like the displayed Stochastics are showing momentum emerging down from overbought. Near-term resistance should continue to reside around the downtrend resistance line that represents the top of the triangle formation.
By James Chen, Chief Technical Analyst, FX Solutions
