USDCAD: Short Term Resistance Line from January and February Highs Breached as Bullish Momentum Returns
The daily candle chart below shows the price history of United States Dollar (USD) against the Canadian Dollar (CAD). This currency pair is known as USDCAD, and is trading near 1.2627 around time of publication today.
Last time USDCAD was reviewed in Ideas You Can Trade support was failing and the pair subsequently traded lower. After finding support on 1.2360 near an expected reversal area, the bullish trend resumed and has continued towards current levels since then. Today that momentum gained as a bearish resistance line (red line on chart below) drawn from the peaks of the last two months was breached to the upside.
USDCAD may now retest the February high near 1.2700 whereas a failure to cross that price or a false-breakout could be followed by a sharp drop. If the bearish line crossed today is also lost again then a return lower should unfold. Otherwise, a sustained break above 1.2700 should be very bullish.
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1.2663 with a Limit to take profit @ 1.2699 and a stop-loss @ 1.2638 Risk/Reward Summary: Limit risk = 36 pips profit / (-25) Stop-loss risk = Gain to Loss ratio = 1.44
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.2553 with a Limit to take profit @ 1.2504 and a stop-loss @ 1.2592 Risk/Reward Summary: Limit risk = 49 pips profit / (-39) Stop-loss risk = Gain to Loss Ratio = 1.24
Medium term daily candle: