Sellers push USDCAD lower; support zone at 1.41922-1.4204 tested

On Friday, after a weaker-than-expected Canadian jobs report, the USDCAD reached a new yearly high. But the breakout only managed to extend roughly 7 pips above the prior yearly high near 1.4292 before turning lower.

Buyers had their opportunity but could not sustain the breakout.

By the close on Friday, the price had moved lower. Selling persisted on Monday until the pair hit its rising 100- and 200-hour moving averages. Buyers used those levels as support and drove the price higher.

The rebound paused near Monday's close, staying below the previous yearly high of 1.4292. On Tuesday, sellers regained control, driving the pair lower in a more directional move. USDCAD fell roughly 0.48%, and the Canadian dollar became the top performer versus the US dollar.

Sellers reach the next downside hurdle

The decline has now reached the upper edge of a swing zone between 1.41922 and 1.4204. This zone is formed by swing highs and lows since September 29.

Thus far, the price has paused near the top of this range at 1.4204.

Sellers have achieved a win by moving below the hourly moving averages. But to strengthen their grip, they must push through this swing area and remain below it. Doing so could pave the way for additional downside toward the next support zone between 1.41297 and 1.4153.

Can buyers defend support again?

Should buyers maintain this support for a fourth straight test, attention would turn to a recovery toward the 100- and 200-hour moving averages around 1.4250.

Those moving averages now serve as the next resistance. Moving above them and holding above would reduce sellers' dominance and reopen the yearly high near 1.4298 as a target.

Currently, sellers are pleased with today's move, but more work remains. The 1.41922-1.4204 zone is where their next challenge starts.

The trading lesson

A move below the moving averages changes the near-term outlook, but the next support level remains important. Sellers require confirmation, while buyers need support to hold.

Traders can use the swing area to gauge risk and control. If support holds, buyers have a basis to buy. If it breaks and remains broken, sellers secure another win.