The trend is your friend. We have heard that axiom so many times and we still feel like it can’t be repeated enough when we see a trend like this.
Notice the beautiful, consistent downtrend in this pair. We also have to note that this was the worst performing pair over the past week. It fell 810 pips from top to bottom.
We are now bouncing off the bottom of the channel. Despite the problems in Europe, we see the potential for a bounce here and believe that aggressive traders might want to wade into long positions, with very tight stop losses.
The RSI is not yet extremely oversold but, at 23, it’s close. We’re not sure whether a bounce will come from euro strength or Canadian dollar weakness. We are long-term CAD bulls but the action over the past week concerns us. CAD was the weakest performer on Friday and closed above some key resistance levels. Oil also continues to struggle.