By: Mike Kulej
Earlier this week, the US Dollar mounted a broad rally against all other currencies. It lasted coupled of days and gained few hundred pips in most cases. On Wednesday, however, this rally fizzled bringing up a question about its sustainability. In case of the USD-CAD, we witnessed a price run up from 0.9980 to 1.0373 or about 400 pips.
As seen on the intermediate term chart, this action broke through couple of levels of resistance established by prior minor highs. They were at 1.0234 and 1.0273. Later on, however, the USD-CAD failed to move above 1.0380, which is a key resistance here. A successful breakout above that level is needed to confirm a trend reversal.
Stalling at important resistance is typical when major trends are changing direction and often some time is needed to accomplish that. Currently, the price is retreating from that level, so far reaching the 38% Fibonacci reversal.
It still could go lower, to 50% or even 62%, but if those are exceeded, chances for a longer-term reversal will diminish significantly. In that case, this recent rally would only be a correction within the USD-CAD long term down trend.
