Potential Trade In The Canadian Dollar

The Canadian Dollar had had a rather sharp rally over the last two weeks and is now testing a very powerful resistance area. For the first half of 2008 the Canadian Dollar has established a very significant support level (97 area) up until August when the currency finally broke through this floor of support. Classic technical analysis states that support should now become resistance and I think that's what we are seeing take place right now.

You'll notice that the stochastics are at an overbought level which has coincided with wonderful shorting opportunities over the past few months. In fact, the last 4 significant highs in the C-dollar could have all been identified in real-time trading had a trader been using this oscillator.

Rather than pic a top, I would wait for the stochastics to actually cross back below the 80 level BEFORE shorting this currency. If the Canadian Dollar blows right through resistance before the stochastics turn below 80, all bets are off and no trade should be taken. Basically what we are looking for is for the stochastics to confirm that resistance has held. As always, we'll see what happens!