Canadian Dollar Crosses Poised For Breakouts, But Will Volatility Come Through?

Daily Forex Technicals | Written by DailyFX | Nov 27 08 13:50 GMT |

Congestion has developed for many of the Forex markets most liquid pairs; but today the DailyFX Analysts' focus turns to the Canadian dollar. Particularly tight ranges through today's thin liquidity points to well-defined technical ranges. Can breakouts be forced before the week ends? Currency Strategist - John Kicklighter My picks: Pending USDCAD Breakout Expertise: Combining Money Management with Fundamental and Technical Analysis Average Time Frame of Trades: 3 days - 1 week Fundamental drivers in the currency market are in short supply for the currency market - not that it would matter much given the circumstances with liquidity - but my interest in USDCAD is nonetheless falling to technicals. Over the past few months, this pair has been exceptionally volatile through periods of clear direction and broad congestion. Right now, the pair is experiencing the latter. Looking at a higher time frame chart, there is a clear double top formation that was developed just above 1.30. And, while the market has already pulled back from its second failed attempt to break through, the potential for a triple top or trend reversal is still up in the air. Perhaps a more pressing chart formation will decide where the market goes from here. A head-and-shoulders formation has been set with the second peak in the double top as the head in the pattern. Shoulders seem to be congestion zone based and hold a rising trendline for a neck line - both optimal for breakout scenarios. With the top of the shoulder at 1.2430 and the rising neckline at 1.22 (the horizontal barrier to the shoulders pattern is 1.21), there are very clear levels to play with. I will wait for a confirmed breakout for entry; but it will be very important to monitor the type of follow through we would get behind any breaks. During low liquidity conditions, it is hard to build momentum. A break next week would be optimal. Currency Analyst - Ilya Spivak My picks: Short CADJPY Expertise: Macro Fundamentals, Classic Technical Analysis Average Time Frame of Trades: 1 week - 6 months The beginning of this week saw CADJPY rebound from near all-time lows to test significant resistance at 78.60, the intersection of a downward sloping trend line connecting the highs since late September and the 23.6% Fibonacci retracement of the 09/25-10/27 decline. Prices have stalled here to two days, signaling increased indecision after yesterday's Shooting Star candlestick. Risk-reward considerations favor a short bias to trade with the dominant bearish trend. However, stops should be kept tight (just above the 11/25 high at 79.36) because noticeably buoyant stock performance amplified by illiquid holiday market conditions could turn even a small rebound in risk appetite into substantial downward pressure on the Japanese Yen. Initial target lies at 72.16, the 11/21 swing low. Currency Analyst - David Song My picks: Long USD/CAD Expertise: Fundamentals and Technicals Average Time Frame of Trades: 2 - 10 Days Fears of a global recession paired with fading demands for commodities continue to favor a bullish outlook for the USDCAD. After reaching a high of 1.2986 last week, the pair pulled back as oil prices climbed higher this week, but the dour outlook for the global economy suggests that the pair will move higher over the following week as investors continue to curb their appetite for risk. I anticipate the pair to work its way towards the 1.2400-10 level (38.2% Fib level of 1.1463-1.3020) next week, and a break above this level could push the pair back towards the October high of 1.3020 over the near-term. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. 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