USD/CAD Could Break Out Soon

By: Mike Kulej

Few weeks ago the USD/CAD had reached 1.0850, a high for the year. Since then, this pair pulled back 1.0380, before rebounding to the current level of 1.0650. This price behavior creates a strong impression of the USD/CAD forming an extended and, possibly, a long-term bottom.
The 1.0850 is the main resistance on the daily chart here. It held before on couple of occasions going back to 2009 and most recently in late May of this year. Should this important level be broken, the USD/CAD might enter a full-blown bull market, with a potential for a large move, perhaps as long as 800+ pips. For this to happen, the price must close above 1.0850 on a daily bases.
As always in the case of breakouts, it would be nice to have an additional confirmation. Many technical indicators can be used for that, including the MACD and the Standard Deviation Indicator. Once the USD/CAD gets above the last high, one would like to see at least one of these indicators to do the same. The lack of confirmation does not negate the validity of the breakout. However, the presence of a confirmation enhances the probability for a given move to be successful.