The USD/CAD is settling into rotation. Most of the time rotational markets spell trouble, but this one has been rather pleasant. Wednesday’s FOMC meeting gave us a nice trade during the overnight. Kudos to anyone who grabbed the position long from yesterday’s recommendation.
Today is a new day. Daylight is burning, so let’s get into the technicals.
The outlook facing the USD/CAD for the rest of the forex session is more of the same. Until the U.S. CPI number drops tomorrow morning at 8:30 AM EST, this product is more than likely range bound.
USD/CAD, Daily Chart
Here are the key levels for today:
Support is present at the 20 Day EMA and Bollinger Midpoint of 1.2441-1.2442.
Extended support levels at the Daily SMA of 1.2338 and 38% retracement of 1.2392.
Resistance at the 78% Fibonacci retracement value of 1.2530.
Bottom line: If it ain’t broke don’t fix it! We have successfully played rotation all week from these technical levels. Until tomorrow’s CPI release, a short from 1.2530 is a premium trade location. Either a scalping approach from this level or position trade will work.
A 1:1 R/R trade with a stop above 1.2550 is the play for a 20 pip position. If scalping, keep the stop loss tight, align risk and reward, and look for immediate positive price action!
The beauty of trading rotational markets is that you can only be wrong once. In the event that price breaks out, stop losses are hit and a new set of technicals comes into play. For now, fading the extremes from our established levels is a solid way to trade this market.