Gold Likely to Dictate Next Move in June Canadian Dollar

The strong turnaround in the June Canadian Dollar has put the market in a strong position to breakout to the upside on the weekly chart. After posting an expanded range four weeks ago and topping at 1.0133, the Canadian Dollar has since held two tests of a major 50 percent price level at .9938 while trying to establish support on an uptrending Gann angle at 1.0064 this week.

The current chart pattern suggests that the Canadian Dollar could breakout through the March 1 top at 1.0133, but is likely to run into some resistance at the downtrending Gann angle at 1.0175. Once this level is cleared the next likely upside target will be September 1, 2011 top at 1.0202.


Based on the main range of 1.0515 to .9360, a key retracement zone has been established at .9938 to 1.0074. Crossing over to the bullish side of this zone will be a sign of strength and a resumption of the uptrend which is why bullish and bearish traders have been battling for several weeks since this zone was first tested.

The important levels to watch are 1.0064 and 1.0074. This is basically a crossing of a diagonal line (an uptrending Gann angle) and a horizontal line (retracement level). Now that the market has crossed to the bullish side of these two points, an important support cluster has formed. This cluster is controlling the short-term direction of the market. As long as this area holds as support, buyers are likely to try to drive the market higher. A failure to hold this zone late in the week could lead to a collapse in the market.

The Canadian Dollar has been trading sideways-to-lower since gold topped and began to sell-off. Now that gold is setting up for a volatile move, Canadian Dollar traders should brace for the same type of trading activity. A breakout to the upside in gold is likely to trigger a similar move in the Canadian Dollar.