There’s a nice uptrend in the works on USD/CAD, and with an active forex calendar for both the U.S. and Canada, we could see sustained volatility to create good opportunities.
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USD/CAD has been in an uptrend since the beginning of September, and with a previous each pullback, it has managed to attract buyers to help push the pair higher. We’re seeing another pullback lower this week after reversing from 1.1100 and now testing a few potential support arguments:
- Previous resistance broken, now potentially support
- rising moving averages as potential dynamic support
- Fibonacci retracement area
- A rising trendline connecting swing low areas
With all of these technical arguments, I think the odds are pretty good would could see buyers watching/acting in the area between 1.1000 – 1.1040 as a potential launching area for a move higher. And fundamentally, I think the recent weak Canadian data (weak jobs and PMI reads this month) and bullish outlook on U.S. interest rates will continue to be the driving force for this pair to go higher.
The main risk to this trade framework is an event driven one with the FOMC meeting this week. It’s a highly anticipated event, which has had forex traders buying up Greenbacks leading up to it in case we see a change in stance by the FOMC to not wait so long before raising rates after they are finished with their asset purchasing program this year.
Also, there could be a “buy the rumor, sell the news” reaction with this event, and if there is, I want to wait it out to see how low forex traders would go on this pair before resuming buy mode. This is why I’ll going into watch mode for now, with the intent to buy if the market retests the 1.0950 – 1.1000 psychological area and if this week’s Fed events continues to support the U.S. Dollar.
What do you think of this idea? And would you rather buy now or is it a good idea to wait until we see what the Fed says this week? Would love to hear your thoughts, so please leave a comment below!