USDCAD – Support Previously Found Barely Holding On, As Downward Pressure Builds
The daily candle chart below shows the price history of United States Dollar (USD) versus the Canadian Dollar (CAD), known as the USDCAD pair, and currently trading near 1.0977, and further lower than over the last 22 forex trading days.
Last time the pair was covered in the Ideas You Can Trade series, a pullback to a previously drawn Fibonacci level at the 161.8% retracement (point 7 on chart in gray color) had provided enough support for the downward momentum to bounce.
However, the short term bearish resistance line (point 1 in magenta on chart), also mentioned in the last post, appears to have continued to drive prices lower, where the 161.8% level has been breached today pushing the pair as low as 1.0938, although it has since recovered to the 1.0975 level around the time of this post.
If this level of 1.0975 doesn't hold, the currency pair will be heading lower, along its current resistance line, and targeting closer to 1.0900.
Whereas if enough support can be regained here (near 1.0975), then a serious recovery could propel the pair back to the previously bullish momentum levels of recent months, and would thus indicate that the pullback of the last few weeks was a correction.
Below are examples of how to trade a bullish reversal or a bearish continuation:
- BULLISH BUY ENTRY ORDER: Create a "Buy Entry Stop" @ 1.1002 with a Limit to take profit @ 1.1019 and a stop-loss @ 1.0989 Risk/Reward Summary: Limit risk = +17 pips profit / (-13) Stop-loss risk = Gain to Loss ratio = 1.30
- BEARISH SELL ENTRY ORDER: Create a "Sell Entry Stop" @ 1.0919 with a Limit to take profit @ 1.0885 and a stop-loss @ 1.0951 Risk/Reward Summary: Limit risk = +34 pips profit / (-32) Stop-loss risk = Gain to Loss Ratio = 1.06