I look through a lot of charts….to say the least. But if I had to pick one chart to call, “My Favorite In The Entire World”, it would have to be USD/CAD. We are coming off a monster base that has taken several years to develop. Not only that, but we have successfully retested that breakout level and are now off to the races.
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These candlestick charts are exactly what our members have access to each week. Here we can see the breakout last year above overhead supply from the top of the base. As the old saying goes, “The bigger the base, the higher in space”. After the breakout, we can see the correction in the second quarter come back and retest that breakout level. This 106 area also represented the uptrend line from the 2012 lows:
Also notice how momentum failed to reach oversold conditions in the recent correction to retest the breakout level. In addition, we hit over bought conditions in the original breakout confirming the bullish range that we’ve been in since mid-2011. The upward sloping 50 and 200 week moving averages also point to higher prices. The next price target is over 1.16 which represents the 61.8% Fibonacci retracement from the entire 2009-2011 decline.
Now moving over to the daily timeframe we can see prices bouncing off the 50 day moving average that is upward sloping along with the 200 day. Momentum is now hitting overbought conditions as it enters a bullish range over the short-term. As prices break out above the 61.8% Fibonacci retracement from the second quarter correction and overhead supply from April, our next near term target is the 2014 high near 1.13.
Based on the bigger picture, I think we still have a long way to go in USDCAD. I really like this chart. From a risk management standpoint we want to look at this two ways. If you’re a longer term investor, we want to remain structurally constructive as long as we hold above the early July lows. Shorter-term, I like this above 1.10 which is the most recent breakout level. But this is a bigger picture macro setup based on a multi-year base, so I prefer to view it that way.
I have to continue to say that this is my favorite currency chart in the entire world.
Tags: $USDCAD $FXC $DX_F $UUP