USDCAD: Upper line of Bearish Channel Provides Barrier to an Upside Breakout
The daily candle chart below shows the price history of United States Dollar (USD) against the Canadian Dollar (CAD). This currency pair is known as USDCAD, and is trading near 1.0734 around time of publication today.
Last time this pair was reviewed in the Ideas You Can Trade series, it was trading around similar levels, and a bearish trend was confirmed with prices subsequently trading lower where support was eventually found around 1.0620 before recovering back towards current prices.
USDCAD faces several barriers of resistance if the current bullish momentum of the last ten trading days continues, and has already found resistance on the July 16th high of 1.0792, coinciding near the 23.6% Fibonacci retracement level as drawn from the high and low of the chart (as seen below).
The pair appears to be right on the edge of a bullish support line (point 2 in blue on chart below) that has guided the recovery over the last two weeks, and is therefore poised to either fall swiftly (if that line breaks) or attempt to push higher if support is maintained.
The prospects for the pair still look bearish, despite the recent recovery, as the downside appears an easier path, with far less support in range under current prices.
Below are examples of how to trade a bullish continuation a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1.0762 with a Limit to take profit @ 1.0791 and a stop-loss @ 1.0742 Risk/Reward Summary: Limit risk = +29 pips profit / (-20) Stop-loss risk = Gain to Loss ratio = 1.45
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.0723 with a Limit to take profit @ 1.0701 and a stop-loss @ 1.0740 Risk/Reward Summary: Limit risk = +22 pips profit / (-17) Stop-loss risk = Gain to Loss Ratio = 1.29
Medium term daily candle: