Friday, June 4, 2010

USDCAD—Heading back to support before data

The remainder of my long profit-stopped out at 1.0375 for +20 pips. The pair now seems intent on heading back to test support again which ranges from 1.0348 down to 1.0275. Yesterday's low was 1.0334. This morning's low (as of 6:22 AM EST) is 1.0368. Two uptrend lines are coming in at 1.0305 and 1.0348.

The 100-day SMA is at 1.0355. Why do I care about the 100-day SMA? Because it has served as a floor for prices the last two days so it offers some validation of support in this area.

The high yesterday was only 1.0463, lower than Wednesday's 1.0572. The conclusion one could reach is that there's no hope this pair can get going in a sustained uptrend. This may be true for the near term; it may be true for longer than that. But a look at the weekly shows higher lows since 2007. The pair needs to drop below .9990 for this uptrend line to be violated. Not that it can't do that but then one could draw another line at the new low, ha-ha. The uneasy fact remains that until the pair drops below the Nov. '07 .9058 low, the secular downtrend is at least on hold and quite possibly over. Offsetting this is that the retracement from the 1.3065 high in Mar. '09 has been deep which hints the underlying uptrend is weak. If you see that decline as an Elliott Wave two, however, one would expect it to be deep since they often retrace almost all of wave one. What's also significant to me is that momentum, reflected by RSI, is looking pretty good, not dropping into oversold areas by any means and is, in fact, maintaining a nice upward trajectory.

If you place your short-term trading within a longer-term context (as I do), this would suggest that buying pullbacks is the way to go. Always, though, carefully and with tight stops. Canadian employment numbers are coming out at 7AM EST and the US NFP at 8:30AM EST so there may be some gyrations in price this morning.

Resistance is at 1.0375/95, 1.0463, 1.0573/81 (strong), 1.0610, 1.0719 and 1.0855. Support is at 1.0348, 1.0334/27, 1.0305, 1.0283/75, 1.0150, 1.0100 and 1.0045.

© Dianne Fecteau, 2010. 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.

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