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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.)
After rebounding off support in the 1.0200 price region late last week, USD/CAD (a daily chart of which is shown) has reflected strong dollar strengthening in the past couple of days by breaking out above several key resistance areas.
This includes the 1.0400 price region that was just broken on Wednesday. Currently, as of the early- Thursday (1/21/2010) New York session, the pair is still experiencing some bullishness, possibly targeting a key downtrend resistance line extending from at least August of 2009. Still within the bounds of this gradual downtrend, USD/CAD is now in correction mode, a bear market rally.
Unless the downtrend line is broken out substantially to the upside, the current prevailing downtrend should continue to be valid. Moreover, any subsequent breakdown below the 1.0400 price region should re-target the noted support around 1.0200.
Any further breakdown below that support could continue down to target parity around 1.0000, and would confirm a downtrend continuation for this pair.
By James Chen, chief technical strategist, FXSolutions.com
