USDCAD took a bit of a tumble today. This isn’t unexpected when you consider the strong congestion and resistance area I wrote about yesterday and this morning. Its low this afternoon has been 1.0655, a point it reached Friday. Clearly it likes this area. It served as a resting place on Friday. Perhaps it will be true again today.
There are four logical correction areas.
1) 1.6045 - 1.6055, which it has achieved and is a purple line on the 3-hour chart below.
2) 1.0580, give or take, the second purple line you see. It's polarity.
3) 1.0455, the uptrend line that began in mid-October.
4) 1.0378, the last logical level. Talk about going to the dogs.
Ideally, RSI will stay above the orange line I drew on that indicator which would indicate momentum is stable and not crazily falling off.
The pair could be entering a sideways range over the next several days from 1.0650 to 1.0800. My profit stops on my current trades are around 1.0630 so if they’re taken out I’ll probably trade this range.
The pair has had a long fall; it has only been in an uptrend for a couple of weeks. It could be basing. On the other hand this entire little two-week upswing could be a correction. If it is, then, whee, it’s going to be another ride down. Nobody can say absolutely what this is at this point and we shouldn’t be second-guessing it. The market will tell us soon enough. What we can do as traders is watch the charts. Find good entry points. Keep stops small. Those things can’t be said often enough. Here is the three-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.