Descending triangles are usually found in downtrends, so I’ll be the first one to admit that this setup is kinda weird. But, hey, I take whatever I can get, so let’s get it on!
The directional bias for a descending triangle is usually to the downside, but since this bad boy decided to form in an uptrend, it would be more prudent not to have a bias. That way, you can be ready for a breakout in either direction. Stochastic is currently pointing down but not yet in oversold territory, so sellers may be in control for now.
At first glance, it looks like there’s nuthin’ happenin’ on the 1-hour forex chart for GBP/CAD, but I assure you that there is.
Price is really sticking to the 1.9050 minor psychological level like glue, but price has been closing below that level for a while now, which is our clue to have a directional bias to the downside. The bears tried to make a break for it earlier, but got stopped. Now, price seems to be gathering strength for a downside push. Price also appears to be using the 200 SMA as dynamic resistance and the stochastic oscillator is currently in oversold territory, indicating that buyers may potentially be exhausted. Of course, being the forex market, there’s also a possibility that price will try to push higher, especially with the right fundamental catalyst.
Forex traders bearish on the pair finally ran out of steam when price reached the 1.2200 major psychological level, allowing the bulls to take USD/CAD back up. But the upwards push suddenly stalled when USD/CAD reached 1.2320 handle. Looking at the chart, we can understand why – this level has seen significant market interest in the recent past. And if we apply the Fibonacci tool, we can see that the current price level lines up quite nicely with the 50% Fibonacci retracement level.
But has resistance already formed or will the bulls try to take price higher? Should forex traders bullish on the bear manage to give the bears a beat-down, we may see price going up to the 1.2400 major psychological level, another price level of significant market interest. Also, should price reach this level, it will have the 200 SMA as dynamic resistance. Although from the looks of it, price already has found resistance. Stochastic is even moving downwards from overbought territory, indicating that sellers are potentially beginning to take control.
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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.