August 3, 2022
  • August 3, 2022

Short term chart ready for a breakout

By on September 17, 2021 0

USD / CAD technical outlook

  • USD / CAD side cut set to give way to a breakout soon
  • Looks like a higher breakout, but you have to wait for confirmation

USD / CAD technical outlook: short-term chart ready for a breakout

The USD / CAD has crashed over the past week and a half, offering virtually no indication of its next direction. But that is starting to change as a 4 hour wedge formation emerges. A breakout needs to be confirmed, and it should happen soon when the price moves closer to the top of the pattern.

Given the (upward) direction of the price before the pattern development, it looks like it will be a continuation pattern that will keep the USD / CAD higher. To confirm this we need a break out of the upper trendline of the corner with a 4 hour candle close above 12690 to provide full conviction.

In the event of a bullish breakout, there is a slope to face from early June, a slope from which the wedge started to develop. If this can be cleared with the most recent swing high at 12762, then the next target will become the 12950 area, which has been a major level in play for some time. It started as a low in 2019, but was then validated as support and resistance last year, and again as resistance in August.

In the event that we will see the wedge trigger to the downside, a break below the lower pattern trendline is required. To add confirmation I would like to see a 4 hour candle close below 12616. This could push USD / CAD back towards the 200 days at 12519 and the start of the month low at 12493.

Overall, price action is tightening unsustainably and some sort of breakout looks imminent; will work with the above scenarios after confirming either one. We might see a fake breakout before we find the eventual direction, something we will have to deal with as we go.

As a rule of thumb, I keep the number of entry attempts to a maximum of two on any idea. So if things go wrong and we get a few bogus breaks that trigger a stop-loss, then I’ll walk away until another day.

USD / CAD Daily Chart

USD / CAD chart in 4 hours

4 hour usdcad chart

USD / CAD Charts by TradingView

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— Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX

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