I’ve already got a short Loonie play going on with my NZD/CAD setup, but I can’t help but notice this neat breakout correction on USD/CAD. Take a look!
USD/CAD Trade Setup
The oil-related Loonie’s rallies are being fueled by Black Crack gains so far this week, thanks to renewed hopes that the OPEC could agree on an output deal in their official meeting later this month. Even Russia might be on board, as energy minister Novak confirmed that they would support any deal that the cartel comes up with.
Meanwhile, data from the U.S. hasn’t been so upbeat in terms of industrial production and PPI readings. This could factor into weaker CPI results due in the upcoming U.S. session, although forex junkies could pay closer to Fed Chairperson Yellen’s remarks to see what she has to say about Trump’s presidency and how it could affect their monetary policy outlook.
USD/CAD already broke past the rising wedge resistance on its daily time frame then zoomed up close to the 1.3600 handle. Price pulled back from there and applying the Fib tool on the latest rally shows that the 50% level lines up with the 1.3300 major psychological level and area of interest. Stochastic is still on the move down, which means that sellers are eager to push this pair lower.
I haven’t set actual entry orders yet since I plan on waiting for reversal candlesticks to form around the 38.2% to 50% levels or for stochastic to indicate oversold conditions. If I’m able to get in, I’ll set my stop below the 61.8% Fib and the 1.3200 handle around the bottom of the wedge then aim for the swing high. This should give me roughly 2:1 return-on-risk with a 300-pip target and a 150-pip stop on a long position around 1.3300.
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See also: Q3 2016 Trading Performance Review