Technical analysis of USD/CAD for January 22, 2014

General overview for 22/01/2014 08:30 CET

This pair is keeping making new higher highs and that is why I decided to take a look at the higher time frames like H4 to analyse the possible wave development. There is some evidence, that a termination pattern in shape of Ending Diagonal triangle is being formed on H4 time frame. Currently, there are three waves completed inside the Ending Diagonal and this pattern has one more wave up to complete before the sell off will happen. The projected target area for wave (v) blue is between the levels of 1.1037 – 1.1063. From there the impulsive wave progression should start and the first support for the sell off would be a blue trendline and Weekly Pivot at the level of 1.0939. To confirm this scenario, the breakout below the level of 1.0904 must happen as the first weak confirmation that the top is in place. Please notice that a Bearish Divergence has formed on momentum oscilator, supporting the scenario of a sudden price collapse after the target zone is hit.

Support/Resistance:

11087 – WR2

1.1037 – 1.1063 – Target Zone for wave (v)

1.1018 – Intraday High

1.0939 – Weekly Pivot

1.0904 – Wave (ii) support level

1.0887 – WS1

1.0839 – 1.0866 – Previous wave four area

1.0790 – WS2

Trading recommendations:

Long positions should be opened from curent price levels with SL below the level of 1.0939 and TP at the level of 1.1037.

The material has been provided by InstaForex Company – www.instaforex.com