The Chicago FED Speaks: USD/CAD Nears Robust Support Zone
Shain Vernier • 1 min read
Today’s pre-U.S. session has brought two releases that have sparked the USD/CAD. First, the Statistics Canada Wholesale Sales for September came in unexpectedly at -1.2%. At the same time, about 8:30 AM EST, the Chicago FED National Activity Index for October exceeded analyst estimates. The result has been chaotic bearish price action.
When taken together both metrics point to a USD run against the Loonie. However, the USD/CAD has fallen considerably and may bring a support zone into play.
USD/CAD Technical Outlook
Today’s trade of the USD/CAD certainly falls under the “whipsaw” category. Failure above Monday’s high and a subsequent test of its low indicates that bears are in complete control.
USD/CAD, Daily Chart
Price has steamrolled through the Daily SMA, and is now threatening an area of robust downside support:
Support(1): 20 Day EMA, 1.2727
Support(2): 38% retracement of yearly range, 1.2722
Support(3): Bollinger MP, 1.2716
As a general rule, converging indicators add credence to the potential validity of a pricing level. Each of these support levels occurs within a 12 pip range. This is an attractive area from which to go long.
Bottom Line: Currently, price is pushing session lows at 1.2760. I will be putting a buy order in the queue just above the 20 Day EMA at 1.2733. The initial stop is beneath 1.2700 at 1.2694, producing a 1:1 R/R of 39 pips.
The idea is to play a return to the Daily SMA around 1.2785. In the event that this trade is elected, it may stay active for an extended period. Be sure to check back for trade management ideas and methods of minimizing our downside while preserving achieved profits.