Downtrend Still Prevails in USD-CAD

By: Mike Kulej

The Canadian Dollar remains strong, especially in relation to the US Dollar. This pair has been in a downtrend for the last half year, falling from about 1.0700 to the recent low of just above 0.9800. By all measures, this is a steady and well-defined downtrend.

USD-CAD Trends - February 7, 2011

It does not mean that the trend is smooth. As a matter of fact, the USD-CAD spent most of the time in numerous consolidations, which were followed by brief periods of directional moves. That made it rather difficult to take advantage of the trend, because a trade would have spent a lot of time being non-productive.

Unsuccessful Price Reversal

The price tried to reverse on few occasions, but every time it was stopped by the trendline. For as long as it holds, the downtrend is intact, even if the USD-CAD is again drifting sideways, rather than charging lower, in a matter resembling the behavior in September-December period, only on a little smaller scale.

Just like then, the price has formed a support, this time at 0.9830 level. If it fails, we could have another short burst of selling pressure, dragging the price lower to perhaps 0.9650 in a rapid move. A rising ADX indicator, meaning a strengthening trend, should confirm that. On the other hand, if the USD-CAD closes above the trendline a reversal would be more likely.