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.
The market failed to hold above 1.2650 – 1.2680 (previous highs) resulting in the formation of a double-top pattern that calls for confirmation (daily closure below 1.2350).
On the other hand, the support level around 1.2350 (lower limit of the wedge pattern) and 1.2300 (79.6% Fibonacci level) have been providing support for successive weeks on the daily chart.
In the long term, a projected target for USD/CAD wedge pattern would be located near the level of 1.3050 (the origin of the last bearish swing initiated on March 2009).
Last week, the resulting weekly candlestick came strongly positive (bullish hammer) closing above the price level of 1.2550 (mid-zone of the consolidation range) which failed to provide enough resistance for the pair.
This enhances the bullish side of the market. The next resistance level, hence the next target to meet the USD/CAD pair is located at 1.2790.
As anticipated for risky traders, bearish pullback towards 1.2350 was considered for buy entry, which is running in profits now. S/L is likely to be located slightly below 1.2300.
T/P levels to be located at 1.2550, 1.2700 and finally 1.3050.
The material has been provided by InstaForex Company – www.instaforex.com