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). That is why, an extensive bullish corrective movement is now being expressed on the chart.
On the other hand, 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.
The price level of 1.2450 should be defended by bears. A daily closure above 1.2450 invalidates the previously mentioned bearish scenario.
Conservative traders can wait for early closure below the level of 1.2300 to confirm the previously mentioned SELL position.
The material has been provided by InstaForex Company – www.instaforex.com