By Mohammed Isah of fxtechstrategy.com
Even though the risk appears to the downside, there are some red flags to keep in mind. Normally when a strong support zone has taken a lot of hits like the 1.0219/04 levels did, a break of that zone should come with a lot of price momentum and sellers' conviction. We think what we are seeing does not match that. Still, we do not fight with price action. That the 1.0219/04 zone was broken and that the pair ended the week below that zone makes the break valid. However, we have to exercise some caution as we will need a follow-through lower in the coming week to confirm the second stage of that break. Furthermore, we have done our correlative analysis among USD-CAD crosses, and that exercise is not convincing, because only two out of about six crosses confirmed a break and did so with a lot of price hesitation. In addition, the commodities -- especially crude oil -- sold off to end the week lower, a sign of nonconfirmation.