Can sellers keep the pressure on and break the MA level
The USDCAD had moved to a new session lows and in the process tested the 200 hour moving average for the 2nd day in a row at 1.40249. The 38.2% retracement 1.40487 is now risk for sellers/shorts looking for more downside. The next target comes in at the 50% retracement 1.40106. The low for the week comes in at 1.40047.
The range for the day is now 147 pips. That is above the 22 day average of 129 pips (about a month of trading). The price is trending lower. Sellers have been in control for most of the day (apart from an early move higher in the Asian session).
Drilling to the 5 minute chart, shows the trend-like momentum.
There have been 3 legs to the downside today. The 1st leg corrected about 38.2% retracement and sold off (see higher yellow area).
The 2nd leg corrected to the 38.2% retracement and trendline resistance along with the 100 bar moving average on the 5 minutes chart (blue line and see middle yellow area him).
We are currently in the 3rd leg to to the downside. The 38.2 to 50% retracement of that move comes in at 1.4048-55. Stay below that level and the sellers (and the trend) remain in firm control (adjust for new lows).
In a trend move, the market price tends to stepped lower with small corrections. The 38.2%-50% of the “legs” lower (I call them “corrective zone”), are often used to limit corrective moves. Other tools such as moving averages and trendlines also tend to come in play on a trend move.
If the correction zone is broken, it does not necessarily mean the price going to raise in the opposite direction of the trend. It does tend to muddy the waters for the trend -like move (i.e., the market is more balanced). In a trend, the sellers (or buyers) are in firm control, hence the ‘legs lower” and modest corrections.