Here is today’s, Dec 21 Forex analysis of the USDCAD currency pair.
Good day everyone! I haven’t been blogging about the $USDCAD currency pair lately mainly because I was waiting for the market to make a decision.
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We are still in a range
The $USDCAD pair is showing that we are still within a range. Two days ago the pair went back to the upper resistance area of the trading range. This is the rectangular box on the chart below.
- Definition: Trading within a range
- Trading within a range means that the market or currency pair is not going anywhere
- It is not uptrending nor downtrending
- This also means the market is going sideways
- Another term that one may use is that it is consolidating
It also actually went a little higher than the previous highs but it did not close there. Eventually selling pressure came back and pushed the price lower.
- This is the last green candle on the chart
- Notice the long wick or tail above the candle
- Also notice the short body
Indecision and Selling pressure
This chart of the $USDCAD is telling me that the market has not yet decided where it wants to go. The highlighted circle on the left side of chart is acting as a really strong area of selling pressure.
I am actually somewhat amused and surprised that there is still strong selling pressure at that resistance area. The reason I say this is because it is no longer a fresh area.
- That last green candle that made an attempt to break that level of resistance was already the fifth (5th) time that it entered that area
- Also, as I already mentioned it even went higher than the previous highs
- This somewhat tells me that sellers are getting weak
- I wouldn’t have been surprised if it breakout that resistance level
But apparently this past two days’ price action brought more sellers in the market and pushed it back down.
Approaching support level
We are also seeing the currency pair unfold into going back into the support level (the lower horizontal line in the chart). It is also quite interesting to note that every time it goes back down this area it went down pretty strong. If you will take a look at those last two big and long red candle including the one for today.
- This big long red candle shows very strong selling pressure
- The same goes for the last long red candle from about a couple of weeks ago
- Also take note that this is the fourth (4th) time that we are also entering this area
- And the last time it went back down there it also made a lower low than the previous lows
Quick update on my trade position
A quick update, by the way, on my trade position that I was holding. As you may have noticed in the chart, I already exited my position as indicated by the arrow where I executed my exit. Check my blog last Dec 6 where I mentioned about my entry to my long position.
My reasoning why I exited is because of the indecision in the market. Luckily I exited near where it went back up to the resistance level and I made a decent profit from it. Granted I wasn’t able to time it and exited where it made a higher high. However, I’m willing to leave some money on the table and move on.
This was still a good timing as today’s unfolding price action would have left me with no profit at all and just breakeven again.
Here’s my final take
In conclusion, I would say both areas of support and resistance are getting pretty weak. We will soon see where the market or $USDCAD pair would decide to go.
Would it be a break out to the upside or break down to the downside? I don’t know. Let us allow the market to play out, which is also why I exited my position.
I have heard of this saying in the trading world, “when in doubt, stay out”. That’s a good mantra for you to remember.
A few final thoughts:
- If it breakouts then I won’t be surprised because it has eaten away on the selling pressure several times (five to be exact) at that resistance level
- If it breaks down I also won’t be surprised because of those big long red candles indicating a very strong selling pressure
- Also, that support level seems to be tested again soon
- Lastly looking at longer time frame horizon, we might say that we are still in a downtrend so this might continue on
So in closing, I am leaning towards a breakdown but I might be wrong. I will wait and see how this will all unfold and then decide how I’m going to plan and execute my next trade.
So there you have it folks, my version of how I analyze and interpret the market action. I hope this has been informative for you and thank you for reading.
Disclaimer: Please do not take this as a recommendation to buy or sell the mentioned currency pair or any other pair for that matter. Trading Forex involves risk and should be treated with utmost caution and discretion. This is my own personal opinion and analysis of how I interpret the markets and I cannot be held liable for any loss that you may incur should you decide to trade any currency pair in the Forex markets.