Bounce or break? USD/CAD is testing the top of its range on its 1-hour forex chart, still deciding whether to head further north or to go back south. Stochastic is on middle ground, barely offering any good clues at the moment, which means that this pair could go either way. If the resistance at the 1.2765 level holds, price could move back towards the support at 1.2685. However, if an upside break occurs, USD/CAD could climb by an additional 80 pips or roughly the same height as the rectangle chart pattern. If you’re bearish on this pair, you could wait for reversal candlesticks to form around the top of the range before shorting. If you’re hoping to catch an upside break, make sure you review our lesson on How to Trade Breakouts first!
Here’s another potential range play on a Loonie pair. AUD/CAD has been moving sideways since the start of the month, finding support at .94250 and resistance around the .9500 major psychological mark. It looks like the bottom of the range is holding as a floor once more while stochastic is moving out of the oversold region, indicating that a rally is in order. In that case, AUD/CAD could head back to the top of the range, but it might encounter a bit of resistance at the moving averages. Also, note that the 100 SMA is currently below the longer-term 200 SMA, which suggests that the path of least resistance is to the downside. With that in mind, don’t rule out the possibility of a selloff just yet!
If you’re gutsy enough to take a countertrend setup, then you might wanna take a look at this rising channel setup on GBP/AUD’s 4-hour forex time frame. The pair is testing the top of the channel around the 2.1000 major psychological resistance at the moment and may be due for a move lower, as stochastic is indicating a pickup in selling pressure. Price could head all the way back down to the channel support around the 2.0650 to 2.0700 levels before resuming the longer-term climb. A quick selloff might last only until the middle of the channel, which is close to the 100 SMA. Keep in mind that the short-term SMA is still above the 200 SMA, suggesting that the uptrend could carry on.
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To get the complete picture and avoid getting blindsided by economic data, you also have to do your fundamental analysis. Lucky for us, Pip Diddy fills us in on what we need to know about fundamentals with his Daily Forex Fundamentals.