This week the U.S. Dollar/Canadian Dollar, symbol USD CAD, broke out to the upside of a downtrending Gann angle from the October 2011 main top at 1.0657. The breakout triggered an acceleration to the upside, setting up a potential short-term rally into a key retracement zone.
Let’s look at the technical breakdown, starting with the important ranges. The main range is .9406 to 1.0657 with a retracement zone at 1.0032 to .9884. This area was tested for a prolonged period as prices consolidated before the breakout. The short-term range is 1.0657 to .9799. This range has formed a retracement zone at 1.0223 to 1.0329. If the upside momentum continues then this is the next potential target zone.
In addition to the upside breakout through a 50% price level at 1.0032, the USD CAD also crossed over to the bullish side of a downtrending Gann angle at 1.0017. If the Rule of All Angles holds true then the next target is the flatter downtrending Gann angle at 1.0337. A strong rally could lead the market to test a resistance cluster at 1.0329 to 1.0337 (Red Arrow).
Now that the main trend is up, the market may begin to walk up an uptrending Gann angle at .9919 this week (Blue Arrow).
In summary, the fundamentals are clearly on the side of the U.S. Dollar. This is giving investors the clarity and conviction to trade aggressively the long side of the USD CAD currency pair.
This week’s breakout over a previous resistance angle set a bullish tone for the week. The next upside target is 1.0329 to 1.0337. Although the definition of an uptrend is higher-tops and higher-bottoms, an uptrending Gann angle at .9919 should act as a strong support guide.
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