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If you’ve been checking out my Comdoll Trading Kit from time to time, you probably know that I’ve been watching this long-term USD/CAD channel like a hawk. And it looks like the pair might be on the move!

USD/CAD Trade Setup

I’m getting mixed signals from this one, though, both from the techs and fundies side of things. For one, I’m seeing a bit of a double top on the pair’s daily chart, with price already testing the neckline around the 1.3150 minor psychological support. However, the latest long-wicked candle suggests a potential bounce and if you squint your eyes just like Taylor Swift, it could pass for a hammer!

Stochastic is in the oversold region, which means that sellers are already exhausted at this point. I’m also seeing a slight bullish divergence since price formed lower lows and the oscillator had higher lows since mid-December.

USD/CAD Daily Forex Chart
USD/CAD Daily Forex Chart

Fundamental analysis doesn’t clear the picture up either, as there are strong arguments for a bounce or a break. On one hand, Trump’s first press conference seems to have spooked dollar bulls who started to worry that the impulsive President-elect could wind up doing some damage on the economy. The oil-related Loonie could be in a good position to take advantage of this sentiment since recent updates from OPEC nations suggest that they’ll be following through on the agreement to curb production this year.

On the other hand, there’s still no denying that Uncle Sam is in much better shape than the rest of its peers and that the Fed’s rate hike timeline could be enough to keep the Greenback supported for the foreseeable future. While Canada has shown a few green shoots lately, it has a long way to go before fully recovering from the impact of the oil industry slump. Besides, rising U.S. oil rig counts could keep market oversupply concerns in play, possibly overshadowing the effect of the OPEC output deal on prices.

I’m inclined to keep a bullish bias on this pair, mostly because this ascending channel has been intact for who knows how long, but I’ll wait for the next few candlesticks to close past the 1.3200 area to see some upside momentum. Of course I’ll also be ready to hop in a short position if price drops below the spike down to 1.3025 since this could mark the start of a major reversal.

Don’t forget to check out our risk disclosure if you’re trading this one, too!



See also: Q4 2016 Trading Performance Review

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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.