Since bulls have pushed further above the upper limit of both depicted bullish channels and the 79.6% Fibonacci level, the market looks quite overbought.
However, bullish pressure is still being expressed on the market as previous weekly closure came above 1.2550 (consolidation zone mid-line).
The nearest support level to meet the USD/CAD pair is located around 1.2370 (lower limit of the confirmed wedge pattern) and 1.2300 (79.6% Fibonacci level that provided significant SUPPORT for successive weeks on the DAILY chart).
Successive lower highs were established within the wedge-pattern depicted on the daily chart. However, the market price action indicated a bullish breakout above 1.2600-1.2660.
Earlier this week, the market failed to persist above 1.2650 – 1.2680 (previous highs) resulting in bearish engulfing daily candlestick.
On the long term, a projected target for the wedge pattern would be located near price levels of 1.3060 (the origin of the last bearish swing initiated on March 2009).
Last week, the resulting WEEKLY candle came strongly bearish as the price zone of 1.2680-1.2650 applied significant bearish pressure at retesting.
For risky traders, the current bearish pullback towards 1.2550-1.2500 offers a valid buy entry. SL should be set as daily closure below 1.2500.
Conservative traders should wait either for a deeper pullback towards 1.2370-1.2300 or at least obvious signs of bullish rejection around the current price levels (1.2550).
The material has been provided by InstaForex Company – www.instaforex.com