Today I’m looking at USD/CAD after it got rejected at a key resistance level.
What do you think of this setup?
If you’ve been tuning in to the FOMC drama the last couple of days, then you’ll know that Fed members have recently upgraded their inflation forecasts, hinted of a rate hike in 2023, and have generally been optimistic about the economy.This is why traders have been pumping up the dollar like there’s no tomorrow.
What’s interesting is that the dollar’s rally stalled at USD/CAD’s 1.2420 levels, which is where the 100 SMA is on the daily time frame. Not only that, but the area also lines up with a trend line resistance that hasn’t been broken since October 2020 AND the 61.8% Fib retracement of the last upswing.
Do you think USD/CAD can still extend its long-term downtrend? The return of a lot of business activities around the world could not only mean more demand for Canada’s crude oil but also risk-taking that could boost CAD.
I’m thinking of placing a small position at current levels and then adding up as USD/CAD’s downswing gains momentum. I could also place orders somewhere closer to the trend line resistance in case the dollar gains ground in the next trading sessions. My stops would be placed just above the 100 SMA and then my profit targets would be somewhere around May’s lows.
What do you think? Does USD/CAD’s downtrend still have legs? Or is it time to consider a long-term reversal for the dollar?
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