A wide, multi-month USD/CAD consolidation has been reported in Comparic.com ever and again since the beginning of 2017. The barriers that kept this pair in check for 10 months eventually broke in May and June – Loonie needed only a month to realize measured range of the formation.
Lows of 2016 broken – before us further declines?
The upper and lower limits of multi-month consolidation coincided with two Fibonacci ratios (measured from maxima to last year minima) – 50% at 1.3575 and 23.6% at 1.2987 (around 1.30). In addition in half of the formation was running S/R zone (July and September 2016 maxima combined with Fibo) and the trend line. Breaking this confluence of support at the end of June was a key factor in the subsequent re-test of the lower band of consolidation and following break of bottom:
As you can see, the measured range of breakout from the consolidation (green bars), coincided with another important technical level – low from last year at 1.12462. Price after FOMC meeting broke through that level and on Thursday opened below, allowing to book about 500 pips of profit.
Descent under historically important support is also signalling that supply pressure does not have to end so quickly, and a possible level test from the bottom will open short positions:
Turning to the intraday chart we see that under 1.2462 we have no sales signal yet. The quotes have outlined short-term support at 1.2413, so we have two points to look for shorts.
