The USD/CAD has been in a consolidation phase, trading in a range of 156 pips over the past week. Tight daily ranges have been marked by limited participation and sideways action. The coming economic data releases out of the U.S. should change that and give this market direction.

Currently, the USD/CAD is breaking above Friday’s high of 1.2217 and last week’s high of 1.2238. With a bit of luck, the bullish action will bring our level into play.

The Trade

This trade setup is a Fibonacci play with the macro trend. Trades like these can be successful as either a scalping or position exercise.

USD/CAD Daily Chart

In contrast to the current EUR/USD or gold setups, this technical roadmap is simple. Here are the keys:

• Last week’s high of 1.2238

• 38% Fibonacci retracement at 1.2290

• Last week’s low of 1.2082

Bottom Line: This trade is fairly straightforward:

• Go short the USD/CAD from the 38% Fibonacci retracement at 1.2290

• The stop loss is relative. For a scalp place it above the psyche level of 1.2300. For a position trade, above the 50% retracement level at 1.2361 is adequate.

• Ensure a 1:1 R/R for the scalp and at least a 1:1 for the position trade.

In this situation, trade management is key. With the coming news events facing the USD, holding positions is inherently risky. Getting in and out of the market quickly using the scalping methodology is a much safer way to play this type of trade.

Either way, trade smart and stay within your means!