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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.

Equity Markets Bond Yields Commodities & Crypto
DAX: 13718.78 -0.31%
FTSE: 6585.86 -0.25%
S&P 500: 3741.33 +0.38%
NASDAQ: 12890.27 +0.31%
US 10-YR: 0.94% +0.005
Bund 10-YR: -0.571% +0.005
UK 10-YR: 0.213% +001
JPN 10-YR: +0.029% +0.009
Oil: 47.80 -0.42%
Gold: 1,887.50 +0.24%
Bitcoin: 28,102.25 +1.29%
Ethereum: 734.82 -0.92%

Fresh Market Headlines & Economic Data:

Stock futures rise as market tries to reclaim record highs in final days of 2020

There is no sign that a bill on $2,000 checks is going to get a vote in the Senate

The international U.S. trade deficit was $84.8 billion in November, up $4.4B from $80.4B in October.

Oil prices up as dollar and U.S. oil inventories fall

Spanish flash CPI -0.5% m/m in December

EU seeks to rebalance China ties with investment agreement

U.K. Housing Boom Pushes Price Growth to Six-Year High

U.K.’s Johnson urges Parliament to rush Brexit Deal into law

KOF Economic Barometer: Constant Level at the End of the Year

China’s Central Bank reiterates it will avoid sharp policy exit

Upcoming Potential Catalysts on the Economic Calendar

China Manufacturing PMI at 1:00 am GMT (Dec. 31)

What to Watch: USD/CAD

USD/CAD 1-Hour Forex Chart
USD/CAD 1-Hour Forex Chart

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.