USD/CAD Trading Plan: October 11, 2017
Shain Vernier • 2 min read
Tuesday’s forex afternoon brief outlined the key levels facing the USD/CAD for the near future. Today provides a different scenario, but one that is may be very lucrative if the market comes our way. It is going to be a theme for the remainder of the U.S. session, but the FOMC minutes are capable of turning the forex on its head.
With that in mind, let’s break down the USD/CAD and identify a high probability trade or two.
I find the daily timeframe particularly useful when trading the USD/CAD. This market is especially sensitive to fundamentals, so an intermediate-term view of price action often lends valuable insight.
USD/CAD, Daily Chart
At first glance, price action appears to be settling into a rotation phase. A few observations facing this market:
The 78% retracement of 1.2530 is proving valid. Yesterday’s recommended short from this level came within one tick of election. If you shaded your order to 1.2529, then the payoff was over 40 pips.
Robust support is present at the 1.2442-1.2440 level. The Bollinger MP and 20 Day EMA are important levels with respect to the intermediate-term.
Extended support levels are present at 1.2392 (38% level) and 1.2314 (Daily SMA).
Bottom Line: My initial read on the USD/CAD is developing consolidation between 1.2530 and 1.2442. Of course, today’s FOMC release may blow these levels out of the water.
For the past four sessions, trade has revolved around the 1.2530 level. In the event that rhetoric out of the FOMC minutes portends a coming rate hike, we are likely to see a directional break above this level.
I will be looking to go long from support at 1.2442 with aggressive risk management, stop below 1.2425 using a 1:1 R/R expectation. This is a premium trade location to the long, and somewhat unlikely to be elected during today’s session. However, the coming FOMC news just might make this trade a reality.