Price action on USD/CAD, a daily chart of which is shown, has continued its bearish path within the context of the clear downtrend that has prevailed in this currency pair since the fourth top around 1.3000 was hit in March.
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(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.)
Within this overall downtrend, price has formed a short-term downtrend resistance line extending from the second test of the 1.1100 region back in early September. Price just reached and was rejected at this downtrend line last Friday with a pin bar/shooting star-shaped candle.
Within the context of the current downtrend, the key bearish events to watch for include a breakdown below a short-term uptrend support line extending from the recent 1.0200 region low, as well as a breakdown below the key 1.0400 support level. If breakdowns below these levels occur, a strong support target to the downside resides around the noted 1.0200 level (which represented a 14-month low back in October when it occurred).
Dynamic upside resistance continues to reside in the region of the noted short-term downtrend resistance line extending from the September high.
By James Chen, chief technical strategist, FXSolutions.com
