USDCAD long term trade plan with 2,000+ pips of opportunity
USD/CAD has been making higher highs and higher lows since February 2011 on the monthly time frame. This year, the pair has been trading on an upward channel and price is currently at support zone of the channel, signifying that we should be waiting for a clear direction on the smaller time frames.
On the daily time frame, we have a bearish King’s Crown, which right tip of the crown has been formed and price is trying to fulfill the crown at around 1.12 zone, this is over +2,000 pips worth of opportunity, but bear in mind that the right tip of the crown took 1 year to form and it retraced about 1,200 pips during this period. Remember, extensions are faster and aggressive, while retracements are slower and moderate, normally with less volatility and Daily Trading Range decreasing. If the breakout to the downside occurs and we keep making lowers highs and lowers lows on the smaller times frame, we can expect several months ahead until the technical targets are hit.
Now, we need to keep also looking at how USD/OIL will be performing too, which is highly correlated to USC/CAD. Currently, price is at $46.00, it’s approaching a strong level of support at $45.00, that would be interesting to see breaking or holding as support. Another important news is that BOC Poloz stated that “rates have been extraordinary low and that interested rates cuts have done their job.”
Trade idea: If the breakout of the upward channel happens to the downside, I’d like to see a test on the backside of the channel before I start selling down to 1.29 to 1.2750 zone short term. On the other hand, if price holds at channel support, I’d like to buy with stops below the lowest low of the channel back to 1.35 area and see how price will react from there. Technically speaking, the short trades look clear to me, but it’s a game where we need to wait for fundamental news to align with the technical side of trading, to give us the competitive edge we need to trade USD/CAD with confidence in the long term.