Macro strength from the dollar is a relatively new phenomenon for 2017. The positive movement has created a few intermediate-term trading opportunities. So far today, the USD is undergoing retracement across many of the majors.

Tuesday’s U.S. session gives us an ideal opportunity to take a shot at the USD/CAD to the long-side.

Technicals

The USD/CAD traded in a tight 56 tick range for Monday’s session. Today has shown moderate extension to the bull, followed by subsequent retracement.

USD/CAD, Daily Chart

Several external factors have contributed to the shift in sentiment towards the USD/CAD. Crude oil volatility, as well as last week's terror attack in Edmonton, have brought weakness to the CAD. Let’s take a look at the technicals from the daily timeframe:

• The 78% retracement from the high on August 31 to September 11 is at 1.2530.

• Bullish symmetry on the daily chart has been constant since September 22.

• The key pyschological level of 1.2500 has been an area of high participation for the past three sessions.

• Since our MP/SMA crossover on September 25, sentiment has been consistently bullish.

Bottom line: The August/September 78% retracement level has withstood an initial test earlier in the session. Trade has eclipsed September’s high of 1.2531 before immediately retracing. This is a strong signal that the 1.2530-37 level is a key area moving forward.

The Trade: A buy of the USD/CAD around 1.2500 is an affordable way to play a second test of the 1.2530-37 level. A stop below Monday’s low of 1.2467 gives a roughly 1:1 R/R payoff for 25-30 pips.

This market may see some volatility on the API crude oil inventories this afternoon. With a bit of luck, this trade will be in the books by then.

Trade smart and watch the risk management!