Further USDCAD Gains Yield New Bull Risk Levels | RJO FuturesPosted 05/04/2017 8:47AM CT |
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.
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.
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.