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With forex traders flipping the script on bullish USD sentiment, I’ve decided to go with the flow. USD/CAD looks prime for a pullback higher; is it time to short?

Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.

USD/CAD 4-Hour Forex Chart
USD/CAD 4-Hour Forex Chart

This is mainly a play at recent weak USD momentum thanks to the FOMC not raising rates in September, and the outlook for a rate hike in 2015 looking like low probability. It’s been a pretty strong rally for the Greenback all year from a swing low of around 1.1950, so there’s a chance there’s a little more giveback to go for the U.S. dollar.

This week, it looks like strong support at 1.2900 turned the market higher, but it may be short lived, especially around the Fibonacci retracment area (1.3115 – 1.3245) and the 100/200 simple moving averages. I’ll look to start building a small position there, with a stop above the strong resistance area at 1.3300, and my target will be the strong resistance area that held back in the first quarter of 2015. Here’s what I’m doing:

Short half position USD/CAD at 1.3145, max stop at 1.3320, profit target at 1.2800

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t follow what I do. Risk Disclosure.

I’m only risking 0.50% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 1.97:1. Of course, anything can happen in the forex markets, so if the story changes and the market becomes all enamored with the dollar again,  I’ll be sure to reassess and adjust quickly if necessary. Stay tuned by following me on Twitter and Facebook!

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.