USDCAD: Widening Uptrend Meets 50% Fibonacci Retracement Line
The daily candle chart below shows the price history of United States Dollar (USD) against the Canadian Dollar (CAD), known as USDCAD, and trading near 1.0953 around time of publication today.
Last time USDCAD was reviewed in the Ideas You Can Trade series, in July 2014, it was facing resistance in a downtrend, which it has since successfully broken out of to the upside, and has continued in a widening bullish channel (see point 4 below in green on chart).
If for whatever reason yesterday's bullish move is reversed with an equally bearish move - indicating a false breakout, the short term bearish continuation that held over nearly the last eight trading sessions could resume with the pair aimed towards 1.0780 near the 23% Fibonacci retracement level (Fib-level).
However, with the bullish momentum gaining within the above mentioned widening bullish channel (point 4), resistance just under 1.1000 appears a likely next target that will be tested, provided the pair can stay above the 50% Fib-level encountered today near 1.0950.
Further targets to the upside include the 62.8% Fib-level coinciding near 1.1025 where resistance could be encountered.
Below are examples of how to trade a bullish continuation a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1.0966 with a Limit to take profit @ 1.0998 and a stop-loss @ 1.0937 Risk/Reward Summary: Limit risk = +32 pips profit / (-29) Stop-loss risk = Gain to Loss ratio = 1.10
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.0881 with a Limit to take profit @ 1.0860 and a stop-loss @ 1.0901 Risk/Reward Summary: Limit risk = +21 pips profit / (-20) Stop-loss risk = Gain to Loss Ratio = 1.05
Medium term daily candle: