What’s up forex fans! With an extremely light calendar ahead and positive vibes across the financial markets, we’re checking out this downtrend in USD/CAD for potential short-term pips.
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Fresh Market Headlines & Economic Data:
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China Manufacturing PMI at 1:00 am GMT (Dec. 31)
What to Watch: USD/CAD
On the one hour chart above of USD/CAD, we can see another example of the U.S. dollar taking a beating, this time against the Loonie, which is likely benefiting from the recovery in oil prices and on recent COVID-related vaccine news.
The pair just broke below a minor support area yesterday, and it looks like that break is holding to form a descending triangle break. This will likely draw in technical traders, both short-term and swing players, especially as we don’t have any major catalysts to likely sway markets for the rest of the week as we approach 2021.
So, if you’re bearish on the pair, shorting at current levels makes sense, but if you wanna be more conservative, consider scaling into a short position up to the broken support area around 1.2820.
And if you’re ultra-conservative, maybe sit it out until we see a bounce up to that level and wait for bearish reversal candles. You might miss out on the trade, but the potential reward-to-risk is always better if you’re more patient.
For the bulls on USD/CAD out there, it’ll likely take a surprise risk-off event to shift the trend on USD/CAD. Right now, there doesn’t seem to be any in sight, so if we do get a major surprise, and in today’s thin liquidity due to the holidays, an upside move could likely be fast and furious.
Watch for a break and hold above the 1.2820 handle in that scenario, and potentially look to add more in a strong risk aversion environment on a break of the falling ‘highs’ pattern marked on the chart above.