USDCAD: Sideways Range Changing to Bearish Down-Channel After 1.24 Lost Today and Support On 1.23 Tested
The daily candle chart below shows the medium term price history of United States Dollar (USD) against the Canadian Dollar (CAD). This currency pair is known as USDCAD, and is trading near 1.2297 around time of publication and sharply lower from today's high of 1.2568.
Today the pair had fell nearly 300 pips from the session high - after support was lost above 1.2400 - a level that had been the lower band of a trading range that extended towards 1.2800 over recent months. Last time USDCAD was reviewed in Ideas You Can Trade - the upper range was approaching and was subsequently reached before returning lower (as expected) - however that lower support line of the range was lost today after 1.2400 failed - and prompted the drop.
If 1.2400 is regained the range-bound trading may continue with a bullish recovery, whereas a failure to regain 1.2400 could enable the new emerging trend to persist. That new trend appears to be shifting into a bearish channel (see diagonal parallel red lines on chart below) and appears consistent with a previous such channel - and which should bring the pair lower (where further support exists on longer term trend lines - as seen on the chart below).
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1.2412 with a Limit to take profit @ 1.2499 and a stop-loss @ 1.2334 Risk/Reward Summary: Limit risk = +87 pips profit / (-78) Stop-loss risk = Gain to Loss ratio = 1.12
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.2278 with a Limit to take profit @ 1.2199 and a stop-loss @ 1.2351 Risk/Reward Summary: Limit risk = +79 pips profit / (-73) Stop-loss risk = Gain to Loss Ratio = 1.08
Medium term daily candle: