Further USDCAD Gains Yield New Bull Risk Levels | RJO Futures

May 4, 2017 8:47AM CDT

The past couple days' gains above prior 1.3685-area resistance reaffirms the developing uptrend and leaves Tue's 1.3650 low in its wake as the latest smaller-degree corrective low and new short-term risk parameter the market now must sustain gains above to avoid confirming a bearish divergence in momentum that would at least expose an interim correction lower.  In this regard 1.3650 is considered our new short-term risk parameter from which shorter-term traders with tighter risk profiles can rebase and manage the risk of a still-advised bullish policy.  Former 1.3685-area resistance is considered new near-term support.

Canada Dollar 240 min Chart

Canada Dollar Daily Chart

The trend is clearly up on all practical scales and should not surprise by its continuance or acceleration.  Former MAJOR resistance from the 1.3600-to-1.3535-range should easily hold as new key support ahead of further and potentially extensive gains IF there's something broader to the bull side brewing.  A failure below this former resistance-turned-support won't necessarily negate a long-term bullish call, but for practical purposes we could not see risking a long-term bullish policy to the only level below this area: 13-Apr's 1.3223 low.  Per such we are considering 1.3500 our new long-term risk parameter to a bullish policy for longer-term players.

Canada Dollar Weekly Chart

What COULD play a role in a peak/reversal-threat environment is the market's engagement of the 61.8% retrace of Jan-Apr'16's collapse on both a weekly chart above and weekly log close-only basis below.  The 50% retrace of 2016's collapse capped this market for months.  This does not necessarily mean the 61.8% retrace will provide a similar cap, but this relationship is worth noting.

Long-time readers of our blog know of our disdain for the myriad "derived" tools that litter the technical analysis space.  Derived levels such as trend lines, various "bands", the ever-useless moving averages and even the vaunted Fibonacci relationships we cite often in our analysis NEVER have proven to be reliable reasons to buck a trend without an accompanying momentum failure.  And they never will.

A momentum failure requires, in this case of a bull trend, proof of weakness below a prior corrective low of a scale sufficient to break the larger-degree trend.  A failure below a short-term risk parameter like 1.3650 will not suffice to conclude a larger-degree top.  Subsequent weakness below key former resistance-turned-support around 1.3500 will.  And while the 61.8% retracement levels in the bar chart above and close-only chart below merit some consideration, ONLY a failure below AT LEAST 1.3650 will stem the rally and reject/define a more reliable high from which non-bullish decisions like long-covers and cautious bearish punts can only then be objectively based and managed.  In lieu of such weakness further and possibly accelerated gains should not surprise.

Canada Dollar Weekly Chart

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