USD/CAD Forecast: RSI Divergence Indicates Failed Test of January Low?
It is easy to see why the market is looking for some more resistance before the end of the year. The last time this occurred was in 2007, when many analysts expected a big crash in the price, so as to send the economy into recession.
That did happen, and many analysts saw that the currency markets had lost control. However, the government and the banks quickly came up with a plan to avoid such a drastic decline in prices. So far, so good!
As the RSI Divergence indicator shows, most indicators (both technical and fundamental) have failed to show much support for the uptrend at present. The only good news for investors is that the price has not yet dropped too far. But even if it does, the market will probably not survive the price drop.
If you are reading this article, chances are you are not really worried about the RSI Divergence indicator either. This is because you are in the minority. Most traders look at the chart and base their decisions on technical analysis and not on indicators.
One of the main reasons why they are not looking into the technical charts is that most of them do not understand the significance of the trend line. And when you fail to understand the trend line, you cannot know where the top and bottom of the price would be.
When you use a trend line to predict where the top of the price could be, you are actually predicting what it would look like if the price breaks a certain resistance level. However, if you don’t know which level to expect, it becomes difficult to determine when the price will break through it, or whether it will continue on the resistance level.
Therefore, the trend line is not a reliable indicator if you want to rely on the RSI Divergence indicator to help you decide when the price will break out of the resistance. levels. In my opinion, you should wait for a break or two before you start analyzing the indicators, because if you can’t do it properly, then you may just have to be left in the dark when the price dips.