Forex Retracement Play on USD/CAD?

Now that the FOMC event has passed, I think it might be time for a pullback in recent USD strength and Loonie weakness. Is there an opportunity to jump in the USD/CAD trend higher?

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USD/CAD 4 Hour Forex Chart

USD/CAD 4 Hour Forex Chart

USD/CAD has been on a tear higher thanks to the expectation that the Fed is slowly ending its easy money policies and to the steep drop in oil prices, which has been negatively affecting countries with strong oil export industries like Canada. I think both situations might be a bit overdone in the short-term, and if it is I think a short-term pullback may be in the cards for USD/CAD.

I still believe the Greenback as the place to be fundamentally, and if there is a pullback to the broken resistance level and moving averages on the four hour chart above then we could see other bulls hop in if that area is retested.  I’ll be looking to take a nibble at that area with a wide weekly ATR stop and a profit target at levels we haven’t seen since the start of the 2008 financial crisis:

Long full position on USD/CAD at 1.1500, max stop  at 1.1340, max profit target at 1.2700

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t follow what I do. Risk Disclosure.

I’m only risking 1.00% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 7:1. Of course, anything can happen in the forex markets, so if the story changes I’ll be sure to reassess and adjust quickly if necessary. Stay tuned by following me on Twitter and Facebook!