The pronounced downtrend in the USD/CAD is taking a pause and may give us an opportunity to rack a few pips. The bumrush against the USD culminated last week with a BOC rate hike, prompting panic selling of the USD/CAD. Relatively good news from Hurricane Irma and a fluid crude oil market may give the greenback a reason to rally against the Canadian dollar.
Counter-trend trading should alway be done with caution and aggressive risk management parameters in place. Accordingly, this is a swing trade with a concrete stop out and positive reward potential.
The daily chart gives us the complete picture of our profit target and risk.
USD/CAD Daily Chart
Make no mistake, the USD/CAD is in a heavy downtrend. However, going long the USD/CAD at the current market price (around 1.2120) gives us an affordable entry to play action towards the daily 38% Fibonacci retracement (1.2290).
The gameplan for this trade:
Stop loss below last week’s low of 1.2060
Take profit at 1.2245
A 2:1 R/R is in play given the trade’s listed parameters
I expect this market to chop sideways between 1.2150 and 1.2100 for the near future. Any retracement in crude oil pricing coupled with positive U.S. PPI and CPI numbers later this week is the optimal scenario for this trade.
As always, trade smart and for tomorrow!