Going Long In The USD/CAD - Forex News by FX Leaders

Going Long In The USD/CAD

Posted Tuesday, August 8, 2017 by
Shain Vernier • 2 min read

It is make-or-break time for the USD/CAD. The bearish pressure that we have seen over the past three months is being vigorously challenged. The result of the action is an opportunity for a trade.

Breaking Down The Technicals

First things first. The USD/CAD currently resides in an interesting technical area, trading just over the 13-day SMA, the 20-day EMA and under the Bollinger midpoint on the daily timeframe.

USDCAD Daily Chart
Daily USD/CAD Chart- Convergence

This is certainly a pivotal technical area. Trading beneath Monday’s low will give credence to the continuation of the long-term bearish outlook on the USD/CAD. But, if the current daily buying pressure holds, we could see a run towards 1.2800.

As of now, there are many reasons to go long from the current market 1.2650-1.2675:

  1. Considerable Support: Backside support with the 20-day EMA and the 13-day SMA

  2. SMA/Bollinger MP Crossover: As I mentioned yesterday, the MP has crossed the SMA for the first time since May. This is a sign of a change in the prevailing trend.

  3. Crude Oil Pricing: The coming U.S. crude oil inventory reports for this week are likely to bolster participation in the USD/CAD. This can be either good or bad for the trade, but increased participation will drive the market.

  4. Concrete Stop Loss: A stop under Monday’s low of 1.2629 gives us confirmation that the current buying pressure has subsided.

Bottom Line: As a general rule, I am a big fan of convergence. When various technicals come together, we can build a case for healthy support/resistance and bolstered market participation.

The trade is to be long on the USD/CAD until proven otherwise. Using a concrete stop out point beneath Monday’s low of 1.2629 gives us the SMA and EMA as support levels. Looking for a second test of 1.2714 produces a 1.5:1 payout depending upon exact entry at current market (1.2650-75).

Affordability is an important aspect of any trade. The presence of a concrete stop and a potential increase in participation have me convinced to long the USD/CAD, at least for the U.S. session.

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About the author

Shain Vernier // US Analyst
Shain Vernier has spent over 7 years in the market as a professional futures, options and forex trader. He holds a B.Sc. in Business Finance from the University of Montana. Shain's career includes stretches with several proprietary trading firms in addition to actively managing his own accounts. Before joining FX Leaders, he worked as a market analyst and financial writer.
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