The USD/CAD continues to bounce in an ever-narrowing range and this has squeezed the pair into a triangle pattern on the daily time frame. Its uptrend line of the pattern that is of particular interest however since price action is testing it today on the heels of the BOC keeping overnight rates at 1.0%.
The lack of a Directional Bias on the daily chart shows that neither the bulls nor the bears are able to keep control over sentiment and momentum, and thus there’s a total lack of a dominant trend.
The lack of a trend will be a persuading factor in which of the intraday time frames I may set up for an entry; the five, 15, and 30-minute charts will be better candidates in an environment where we have to question follow-through in either direction.
Look at the daily chart and you’ll see that the pair is resting on the uptrend line support of the triangle. This is a major uptrend line because it reaches back into the market memory (the initial touchpoint dates back to Sept. 2011), I has multiple touchpoints (three excluding today’s test), has good separation in the touchpoint (meaning that all three are not bunched up in one area but rather spread out throughout the trendline), and finally it’s relevant since it’s being tested today.
Past performance is not indicative of future results
The USD/CAD follow-through will be predicated on who wins the battle at the uptrend line support being tested today. Since there is no Directional Bias, the likelihood for follow-through below this level is low UNLESS crude oil re-strengthens and/or the greenback drops.