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Forex: Ideas You Can Trade - USDCAD Sharply Higher, What's Next?

Posted by Steven Hatzakis on Jan 21, 2015 3:21:00 PM

USDCAD: Long Term Trend Revealed Following Bank of Canada's Surprise Rate Cut, 1.3050 Possible in 2015

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 1.2334 around time of publication today- and sharply higher after Bank of Canada' surprise rate cut.

Earlier this month last time USDCAD was reviewed in Ideas You Can Trade, the pair was very close to hitting 1.20, and subsequently built both resistance and support near that level before a breakout above that price occurred last week. Since then a small pullback was followed by yesterday's push above 1.2100 and today's sharp move from a session low of 1.2062 to a high just under 1.2400 - after the Bank of Canada (BOC) decision.

The longer term trends revealed are twofold. Firstly, the price move today is fast towards the bullish resistance line (in yellow) on the first daily chart below, and the longer term monthly chart further below shows the ceiling near 1.3050 where upside resistance could be targeted later in the year - or even much sooner at this pace. The line on the daily chart means that the pair has resumed its steep uptrend - as can be seen on the monthly chart. Long term USDCAD analysis can also be seen in Today's Trading Edge, covered earlier in the WorldWideMarkets Community.

The increased volatility in the currency markets in recent weeks also means the pair could pullback just as sharply before making an even larger move higher, and therefore requires caution and adjustment of positions sizes and/or margins depending on risk appetite. 

Below are examples of how to trade a bullish continuation or a bearish reversal:

1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1.2401 with a Limit to take profit @ 1.2600 and a stop-loss @ 1.2259 Risk/Reward Summary: Limit risk = +199 pips profit / (-142) Stop-loss risk = Gain to Loss ratio = 1.40

2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.1998 with a Limit to take profit @ 1.1799 and a stop-loss @ 1.2099 Risk/Reward Summary: Limit risk = +199 pips profit / (-101) Stop-loss risk = Gain to Loss Ratio = 2.00

Medium term daily candle:

USDCADDaily January 21 2015 note

Long term MONTHLY candle chart:


USDCADMonthly January 21 2015 note LONG TERM

Topics: Canadian dollar, Canada, Loonie, forex trading, technical analysis, USD, USDCAD, Dollar-Cad, Cad, Canadian


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