Will USD/CAD Confirm a Double Top?
12/03/2008 10:14 am EST
The key USD/CAD pair (a daily chart of which is shown) is giving off some clear, yet conflicting, technical signals. After coming down from a rather precise double test of the 1.3000 price region, the pair has settled down somewhat to adhere to a significant uptrend support line (the steeply angled green line) that began back in late September.
A true double top formation, of course, would not be confirmed unless price dropped below the trough between the double peaks. The level of this trough is approximately 1.1470, which is around 1000 pips below the current price. In the meantime, as mentioned, price is currently respecting the dynamic support offered by the steep uptrend line after dropping from the second peak of the double test. Any continued upward momentum could once again target the 1.3000 region.
Somewhat more likely from a technical perspective, however, we should eventually be seeing a breakdown of the uptrend support line, in which case price should initially target the 1.2100 level, a key prior support/resistance region.
By James Chen, Chief Technical Analyst, FX Solutions