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 expressed as the previous weekly closure came above 1.2550 (consolidation zone mid-line).
Successive lower highs were established within the wedge-pattern. However, the market expressed a bullish breakout above 1.2550-1.2600 shortly after.
Earlier this week, the market failed to persist above 1.2650 – 1.2680 (previous highs) resulting in the formation of a double-top pattern that waits for confirmation (daily closure below 1.2350).
The nearest support level to meet the USD/CAD pair is located around 1.2350 (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).
On the long term, a projected target for the wedge pattern would be located near the price level of 1.3050 (the origin of the last bearish swing initiated on March 2009).
Last week, the resulting weekly candlestick came strongly negative as the price zone of 1.2680-1.2650 applied significant bearish pressure to retesting.
This indicates the bearish tendency of the market for the medium-term perspective. The nearest bearish targets would be located at 1.2150 and 1.2100.
For risky traders, the current bearish pullback towards 1.2350 should be considered for a valid BUY entry with Stop Loss located slightly below 1.2300.
The material has been provided by InstaForex Company – www.instaforex.com