Help! I’m confused! I’m seeing neat technical forex setups on a couple of Loonie pairs, but I can’t figure out which one makes more fundamental sense. Care to share your thoughts?
First up, I’ve had this long CAD/JPY trade idea, based mostly on improving Canadian economic data and a potential tightening bias from the BOJ. However, current market sentiment doesn’t appear to support a long forex trade since the lower-yielding yen is able to take advantage of the risk-off environment.
The technicals are still looking pretty solid, as the pair is stalling right at my entry area while a bullish divergence can be seen.
Today’s Chart Art from Big Pippin had an interesting USD/CAD forex setup that caught my eye though, as a short-term trend retracement appears to be taking place. As you can see from the chart below, the pair is pulling back to the 1.1200 area, which lines up with the 61.8% Fib level and the rising trend line. To top it off, a bullish divergence can also be seen!
On the one hand, I’m getting more and more convinced that risk aversion might be here to stay, as another global economic slowdown is likely to take place. This should favor the safe-haven U.S. dollar, but the change in FOMC bias and the disappointing U.S. retail sales release could the Greenback weak for now.
Which setup do you think has a better chance of turning out a winner? I could really use your feedback on this!
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