USDCAD: After Resistance Under 1.10, Bullish Support Line Retested
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 1.0948 around time of publication today.
This pair was reviewed just five days ago in the Ideas You Can Trade series, after support on the lower line of a widening bullish channel was reached and resistance under 1.10 was correctly predicted -with a reversal occurring around 1.0984. Since then after USDCAD reversed under 1.10, it has yet again returned to test the lower support line of that widening bullish channel.
If support holds and a reversal of the bearish pullback should lift prices back towards 1.10 to retest resistance, where a break above 1.10 would be even more bullish. Whereas, if the support being tested today fails the bearish pullback would pick up considerable momentum as it would signal an exit to the downside of the widening bullish channel.
In addition, the 50% Fibonacci retracement level coinciding near current levels (and as discussed in the last post) provides an additional line of support near 1.0950, meaning that a bullish reversal could be more likely - in addition FX markets saw the USD strengthen across a number of major currencies in recent days.
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1.0998 with a Limit to take profit @ 1.1027 and a stop-loss @ 1.0978 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” @ 1.0936 with a Limit to take profit @ 1.0901 and a stop-loss @ 1.069 Risk/Reward Summary: Limit risk = +35 pips profit / (-33) Stop-loss risk = Gain to Loss Ratio = 1.06
Medium term daily candle: