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With crude oil weakness hitting the headlines once more, I’ve hopped in a short Loonie setup with this USD/CAD short-term ascending channel. What do you think of this play?

USD/CAD Trade Idea

In my Comdoll Trading Kit, I’ve shown y’all how the pair is moving inside a range visible on its 4-hour chart but that price is stalling around the middle.

With the fresh downside pressure on oil prices this week, I’m thinking that this area of interest around the 1.3300 area could already hold as support and push USD/CAD back up to the resistance.

Zooming in to the 1-hour time frame, I spotted an ascending channel that’s just forming. Price is testing the channel support, which happens to line up with the 50% Fibonacci retracement level at the 1.300 major psychological mark.

The pair dipped slightly below this area on stronger than expected Canadian retail sales figures, but the Loonie seems to be shrugging off these numbers and turning its attention to oil market updates.

USD/CAD 1-hour Forex Chart
USD/CAD 1-hour Forex Chart

The American Petroleum Institute reported a buildup of 4.53 million barrels in U.S. stockpiles for the past week, more than twice as much as the projected increase of 2 million barrels and enough to erase the small draw from the other week.

This sets the tone for a larger increase in the Energy Information Administration’s inventory report due tomorrow, possibly leading to another wave lower for crude oil.

On the flip side, the U.S. dollar could stay supported by hawkish Fed expectations, with more central bank officials confirming that at least three rate hikes are in the cards for the year.

Of course this depends on whether or not actual data supports these biases so I’ll be keeping close tabs on upcoming jobs and inflation reports to see if I should be exiting early.

I went long at market when price jumped back inside the channel (1.3375) and is starting to show bullish momentum, which could be enough to take it back to the channel resistance near the 1.3600 handle.

I set my stop past the lowest Fib and the 1.3200 major psychological support so I could be out of the trade in case support breaks.

Here are the deets:

Long USD/CAD at market (1.3375), stop loss at 1.3175, profit target at 1.3575.

I risked 0.5% of my account on this setup for a potential 1:1 return-on-risk. Don’t forget to check out our risk disclosure if you’re trading this one, too!

Cheers,

Happy

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.