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USD/CAD Trading Near a Congestion Pattern Apex

The USD/CAD has been in consolidation/congestion since tagging 1.1278, which stands as the 2014 high. You can see a falling wedge, or pennant pattern, which reflects a decrease in volatility as the market consolidates.

Actually, you can argue that there was an increase in volatility when the market made a higher high and followed with a lower low, but then the volatility still subsided afterwards..

This week, the pair is at the falling resistance, and trading near the apex.


(usdcad daily chart)

Bullish scenario:

Don't let a break from this pattern signal more than just an increase in volatility. A bullish continuation is shelved until a break of at least 1.10. In this scenario, 1.1053 will be the short-term target, above which the 2014-high of 1.1278 opens up .

Bearish scenario:

Otherwise, the market remains bearish in the short-term, with downside risk toward 1.0730-1.0740, which includes a previous resistance, and the 200-day SMA.

Because the prevailing trend since late 2012 has been bullish, we should limit the bearish outlook for now, until another failed bullish attempt, followed by a hold below the 200-day SMA.