Prices are just now breaking-out the resistance at 191.93, formed at 5/June. The background is positive, though the market has been on a strong trend for 3 days now, so a pause after the break-out is likely. I want to see a good volume on the break and a test bar (gray histogram bar) afterwards. Given the circumstances, it’s likely the market will have to be shaked-out, with prices coming to 191 2 price level, so the stop-loss can’t be too tight.
Like I wrote in the previous post about USDCAD, there was an high chance of a false break-out of the 1.253 resistance due to the weak background, and previous supply signals at that level, meaning it was a likely distribution level. The candle that took prices above the resistance, yet closed below it, due to selling pressure, was a good confirmation of the false break-out and hence a good spot to short. Closed the trade after 2 bullish congestion zones.
This pair has been showing significant supply at 1.25 and up, with no previous resistance, which means it isn’t overhead supply (which is usually not something to worry about). The most significant resistance is at 1.25369, which is the high of the previous supply bars. There is a trendline coming from almost the beginning of this rally, since 12th May, which is the level to watch for an eventual short trade.
There is a high chance there will be a fake break-out, in order to get more longs trapped and to catch the stop-losses of shorts, which would confirm that this is in fact distribution. This would be a break-out with either low volume, or a break-out with supply signal right above the resistance after it was broken. To the downside, a break-out of the trendline with good volume would be a trend change signal, if the background keeps at being weak, and given the weakness behind. At the moment the pair is making successive higher lows, which means that for now the prices are being supported, and the dynamic trend is giving the same indication as it’s still up.
Brent crude oil, which is related to the Canadian Dollar, as Canada is a big oil exporter, is on the lower part of the trend channel, and recently showed a demand signal, at a previous strength area. It’s not showing the sideways movement as USDCAD is though, so I’m waiting for prices to stabilize at this level or to make a higher low, and for the background to change to strong.
The Yen is on a trending channel, and recently got to the upper part of it. After an attempted break-out, the market quickly reversed, which was marked as supply by a purple dot above the candle. Looking back though, we can see there was an avalanche of demand bars around the 118.500 level. It was also accompanied by very high (red) volumes. Looking even further back, more such signals can be seen, starting from 18th March. This is actually a retracement of an uptrend started in January/2015, which is where that up trendline in the chart is coming from.
Given the accumulation signals, given enough time, the balance is tilted to the upside, so I’m not looking for shorts in this pair, even if there is a high chance that it’ll reverse to the support at 118.486, or even just to the up trendline – and there’s where I’ll be looking for longs, in a test bar. A break-out of the 120.842 with good volume would also be a good confirmation of the potential strength behind.
