Technical Analysis of USD/CAD
If we study Fig 11.06(a) – a monthly chart of the USD/CAD – more closely, we see that the USD has been in a long-term downtrend against the CAD for a number of years. This started back in 2001, when it traded in the region of 1.60 CAD and lasted for nearly six years. On the 4th of November 2007, the USD/CAD exchange rate dropped to a low of 0.90560.
For the biggest part of 2008 and the first part of 2009, the USD was trying to recover some of the lost ground and it partially succeeded. On the 8th of March 2009, it reached a high of 1.30600 before going into a new declining phase that lasted more than two years. It did not quite reach the lows of 2007 again: On the +26th of July 2011, it briefly touched 0.94052 before starting to recover somewhat.
Switching to Fig. 11.07(a), we see that since then we have experienced a mini bull run. On the 4th of October 2011, it briefly touched a high of 1.06567. After that, the price has been dropping steadily once more and it closed below the Ichimoku cloud for the first time on the 27th of October 2011.
Right now, the price is slightly above the bottom Senkou Span B line of the Ichimoku cloud. It is therefore in the ‘uncertain’ part of the cloud, where traders are advised to adopt a wait-and-see approach. The green Chinkou Span is still below the price of 26 periods again, indicating that we are in a bear phase. This is confirmed by the blue Kijun Sen and the red Tenkan Sen lines, which are both below the Ichimoku cloud.
For long trades, a cautious trader would wait for at two closes above the cloud. For short trades, the price should at least break downwards through the blue Kijun Sen and the red Tenkan Sen.