Rotational Trading Plan For The USD/CAD

Wednesday’s Bank of Canada (BoC) announcements shook up the Loonie, bolstering short-term volatilities. Since then, the market has settled near a key area of downside support. No doubt about it, rotation is quickly becoming the rule for the USD/CAD.

Commodity prices have given no help to the Canadian dollar today. Energies are trading in the red, with WTI crude oil down moderately and Henry Hub natural gas trending south.

USD/CAD Technical Outlook

The daily chart illustrates the degree of consolidation in the USD/CAD market right now. We are observing a possible formation of three consecutive near-Dojis. If today’s candle closes as a Doji, this market will be poised for a directional move in the near future.

Prolonged compression between support and resistance levels is evident in recent days for the Loonie. Here are the levels to watch for in the near future:

• Resistance(1): 20 Day EMA, 1.2528
• Resistance(2): Bollinger MP, 1.2556
• Support(1): 62% Retracement Sept. Low/ Dec. High, 1.2388
• Support(2): BoC Statement Low, 1.2369
• Support(3): Swing Low, 1.2355

Bottom Line

Rotational markets are not very exciting to trade. But, given the proper perspective, they can be profitable. As the USD/CAD continues to tighten, support is highly likely to prove relevant once again.

For the remainder of the week, I will be looking to buy in just above the 62% macro retracement at 1.2390. A stop beneath the swing low of 1.2355 will provide a good opportunity to take 35 pips on a 1:1 R/R trade management plan.

With no extreme market movers coming up on the economic calendar, this trade should experience true price action. As always, trade smart and for tomorrow!