Take note of all those buying wicks seen to the left of current price within the green arc pattern. This resembles what we like to call: ‘demand consumption tails’. Since we believe the majority of the buy orders within and around this region have already likely been taken out, it is possible the USD/CAD has further to decline yet. We believe it could be as far as the 1.3100 handle judging by the structure of 4hr price action.
Nevertheless, when we step across onto the higher timeframes, the outlook is a little different. From the weekly scale, price is trading within shouting distance of a weekly swap (support) level at 1.3128. Down on the , however, price is very close to hitting a daily ascending taken from 1.2537. This is not to say price will not reach 1.1300, it’s just nice to be aware of what we could potentially rebound from should we decide to short this market.
Given the points made above, our prime focus today will firmly be on 1.3200 in the hope that price retests this number before continuing lower (black arrows). Should the retest be seen, together with reasonable lower timeframe selling confirmation, we’ll jump in short and look to trail our position behind distinct lower timeframe resistances until price either reaches 1.3100 or stops us out.
• Buys: Flat (Stop loss: N/A).
• Sells: 1.3200 Tentative – confirmation required (Stop loss: dependent on where one confirms this level).