Even though the BOC refrained from cutting interest rates this week, I’ve still got a bearish Loonie bias because of their downbeat statement and lowered growth forecasts. A couple of weeks back, I had been waiting for a triangle breakout to take place but I think I may have found a better entry point.
As you can see from the pair’s 4-hour chart below, the symmetrical triangle is still very much intact and price is making its way down to the bottom of the formation. Now this lines up with the ascending channel support so I’m thinking it might be enough to keep losses in check.
In terms of fundamentals, Uncle Sam is in much better shape compared to its North American neighbor, which is still struggling to get its energy sector back on its feet. Apart from that, risk sentiment could continue to support the lower-yielding U.S. dollar on safe-haven flows. After all, global economic uncertainties might keep weighing on commodity prices and discourage traders from pursuing higher-yielding currencies.
I’ll be on the lookout for the top-tier U.S. releases on Friday, though, as downbeat CPI and retail sales figures could trigger a downside break and force me to exit early.
I’m considering a buy order at the channel and triangle support with a stop that’s around the same size as the pair’s average weekly range at 250 pips and a profit target at the top of the channel. I’ll be ready to trail my stop to entry once price tests the triangle resistance, though.
Here are the deets:
Long USD/CAD at 1.2925, SL at 1.2675, PT at 1.3175. I’ll be risking 0.5% of my account on this setup for a potential 1:1 return-on-risk.
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