Since bulls pushed the price further above the upper limit of both depicted bullish channels and the 79.6% Fibonacci level, the market looks quite overbought. That is why, the price failed to hold above 1.2650 – 1.2680 (previous highs) resulting in a formation of a Triple-top pattern.
Successive lower highs were reached within the depicted consolidation zone enhancing the bearish side of the market.
Support levels around 1.2350 and 1.2300 (79.6% Fibonacci level) were broken after providing significant support on the daily and weekly charts for several weeks.
Daily fixation below 1.2300 opened a way towards the levels of 1.2000 and 1.1940 (the depicted weekly uptrend) for the USD/CAD pair. Bullish support was offered around these levels. A bullish pullback took place shortly after.
Recently, the price zone of 1.2450-1.2500 constituted strong resistance (backside of the broken uptrend and the previous consolidation zone).
As anticipated, a daily candlestick closure below 1.2430 (previous week) enhanced further bearish decline. Since then, the price zone around 1.2400 has constituted solid intraday resistance for the USD/CAD pair.
However, the previous weekly candlestick closed at 1.2270 (reflecting lack of enough bearish momentum). The USD/CAD pair needs a frank weekly closure below 1.2300 to ensure further bearish decline in the long term.
However, persistence above the level of 1.2220 enhanced a bullish pullback towards 1.2400 (the key level depicted on the chart) where a valid sell entry may be offered if enough bearish rejection is expressed on the short-term charts.
On the other hand, conservative traders can wait for an early re-closure below the level of 1.2300 to confirm the previously mentioned sell entry.
The material has been provided by InstaForex Company – www.instaforex.com