USDCAD – The Bearish Momentum Gained Traction as Support Faltered
The daily candle chart below shows the price history of United States Dollar (USD) against the Canadian Dollar (CAD) known as the USDCAD. As the trading week wrapped up just hours ago, USDCAD last traded around 1.0976, after hitting a low of 1.0955 earlier today.
Support was expected on a line just above current prices, as covered earlier in the week when we last wrote about USDCAD in the Ideas You Can Trade series, however, that line failed today, and the last bit of support may be holding on now.
The low reached today of 1.0955 coincidences just about on the 1.0950 Horizontal support line, a static price level that has provided cushioning on a number of occasions in recent months, the last of which was March 6, 2014. In addition, the level where USDCAD closed today, appears to be just off the 161.8% Fibonacci line that had been previously drawn, and could also act as support.
However, consider that these support elements are the last of their kind around the current theme of the chart below, if these fail the bearishness could become accelerated. Whereas, if these lines hold then a serious recovery or bullish reversal should happen. Therefore, traders may be adjusting their entry/exit, accordingly.
Below are examples of how to trade a bearish continuation a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1.1015 with a Limit to take profit @ 1.1052 and a stop-loss @ 1.0990 Risk/Reward Summary: Limit risk = +37 pips profit / (-25) Stop-loss risk = Gain to Loss ratio = 1.48
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.0947 with a Limit to take profit @ 1.0909 and a stop-loss @ 1.0978 Risk/Reward Summary: Limit risk = +38 pips profit / (-31) Stop-loss risk = Gain to Loss Ratio = 1.22
Medium term daily candle: