USDCAD is up 257 pips as I write this at 6:45 AM EST. Looking at various time frames, I see that on the 5-, 15-, and 30-minute charts as well as on the 1- and 3-hour charts, the pair’s RSI has fallen from overbought. On the daily chart it’s so far from overbought as to not merit a mention. Falling from overbought isn’t a bad sign, necessarily, but it implies some loss of momentum. Not unreasonable after a rapid climb. One needs to catch one’s breath, after all.
The pair has ranged from 11AM EST yesterday to 1AM EST today, before climbing a bit more. Latecomers joining the party before it ends? Could be. Or it could be healthy consolidation. A look at the hourly chart doesn’t show any real concern. It’s maintaining a short term trend line although I do wish the angle wasn’t so steep. It shows what might be a bull flag. But this could also be an orthodox broadening top which is deadly after an uptrend. There are no tall upper wicks on the candles that can cause alarm. Indeed, the candle before this one had a nice long downward shadow that hints it was rejecting prices at the lower levels. I have 100 pips locked in as a profit stop and I lightened some after 200 pips profit yesterday. I’ll watch this pair for now but not intently. There’s nothing I can do to affect it. Here’s the hourly chart and see the three hour chart below it:
On the three hour chart, you can see this pair is at a resistance level. It’s probably true that there are a lot of big players with more money on the table than I’ll ever see that don’t want this pair ascending past certain levels. If I wasn't already in the trade I wouldn't go long here. I'd look for a pullback or watch to see it safely clears this resistance level. If that’s a bull flag then there’s more upside. But let’s not get ahead of ourselves. Let’s watch and see if this dog hunts. Here's the 3-hour chart:
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.