The Canadian dollar has experienced a torrid few weeks as the pair’s sentiment has suffered numerous blows due to the ongoing rout in global energy prices. However, the charts are signalling some interesting opportunities ahead as price action breaks lower towards the long run trend line. Subsequently, there is mounting speculation that the currency pair is about to roar and that a bullish leg could be ahead.
Taking a look at the technical indicators shows a pair that has recently been on the decline and under the control of a relatively strong short term bearish trend. However, price action has entered into an interesting zone of support which happens to coincide with a large period of sideways consolidation from December, 2015. In addition, the long term bullish trend line is also present in this liquidity zone, giving credence to the argument that a bullish leg could be ahead.
Further supporting the upside breakout contention is the RSI Oscillator which has been under pressure and trending lower of late. However, the key metric appears to be retreating out of over-sold territory as it strengthens and moves higher. In addition, stochastics is also mirroring this view which, in fact, diverges from price actions direction.
Subsequently, given the strong support zone that the pair has just entered into, as well as the co-location of the long term bullish trend line, a breakout of the current price channel is highly probable in the coming days. Look for an entry when price action breaks the current channel and moves above the 1.33 handle. However, keep your stops tightly below the trend line to protect against any bearish break down.
