I’m seeing a neat technical setup on the long-term chart of USD/CAD, but do the fundamentals line up with a long play? Here’s what I’m thinking.
Long USD/CAD Idea
I’ve had this daily ascending channel on my radar for quite some time, but hesitated to jump in when price dipped to support. But when I saw this neat bounce on Forex Gump’s weekly outlook, I figured it’s time to revisit the setup!
The area of interest around 1.3120 appears to have held quite well as a floor since it lined up with the channel bottom and 61.8% Fibonacci retracement level. The pair even made a couple of attempts to break below it but failed.
Speaking of two attempts, zooming in to the 4-hour time frame reveals that those dips actually created a double bottom reversal pattern.
The pair is already testing the neckline of this formation, which suggests that a breakout might be brewing. If bulls keep charging past the 1.3320 resistance, a rally of the same height as the double bottom might follow.
Stochastic is already indicating overbought conditions, however, so buyers might be feeling too exhausted to push for more gains.
This could all boil down to the upcoming BOC decision this week, as well as Canada’s jobs figures. No actual policy changes are expected from the Canadian central bank, but market watchers are keen to find out how policymakers will react to recent trade developments and crude oil action.Meanwhile, the jobs report had a strong showing in the earlier release, so traders might be on the lookout for a bit of a dip this time. Of course this will happen at the same time as the U.S. NFP release, which tends to steal the spotlight. A slight pullback in hiring is also expected from Uncle Sam, so it could be a toss-up on Friday!
I haven’t set actual entry orders yet, but I’d try to hop in on a break past the double bottom neckline and set my sights on the long-term channel top around the 1.3800 mark. That way, I can place a wide stop below the dips to 1.3100 and still have roughly 1.8-to-1 R:R.
What do you guys think?
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