At the end of last week, I looked at the USD/CAD and was anticipating for a bullish swing before considering a plan to sell.
USD/CAD - Look for a Clear-out, then Short (7/25)
We got the pop up as anticipated, and price is now starting the week in the 1.08-1.0820 narrow range. There is still some near-term upside risk before price will be challenged by key resistance factors. Then if price stalls below 1.0850, we should consider shorting around 1.0835.
USD/CAD Daily Chart 7/29
Looking at the daily chart, you can see that the market is still bearish despite the run-up in July from 1.0620 to 1.0820. The USD/CAD is now testing a falling trendline that connects the 1.1053 and 1.0960 pivots. Price is also testing the 200-day SMA, first time as resistance since crossing below it in June. Ability to hold as resistance offers a "slingshot" bearish signal. The downside risk extends to the 1.0588 level (2014-low) down to the 1.0560, Dec. 2013 consolidation support pivot.
A break above 1.0850 however could be a sign that USD/CAD is not bearish. It is not a bullish signal, but suggests that the market could be in consolidation, and that the 1.0620 is the support in this consolidation structure, while the resistance has yet to be established.
With that said. Let's examine a sell at 1.0835, with a stop above 1.0850 (ie. 1.0875), and a target of 1.0620, though we know there is potential for a lower low within the bearish mode present in the daily chart. This conservative target offers a reward to risk of 215:40, a better than 5:1 reward to risk. Note that this is a conservative target for a bearish outlook. However, for a sideways outlook, the 1.0620 is the aggressive target.
In the consolidation mode, the conservative target, if we respect July's rising trendline, would be the 1.0760 area. This offers a reward of 75 pips, and thus a reward to risk ratio that is slightly below 2:1. Then the 1.70 area is a key support/resistance pivot would be the medium-expectation. This offers a reward to risk of 135:40, which is slightly better than 3:1.
It appears that if you have your stop at 1.0875, a sell at 1.0835 has decent reward to risk in consolidation outlook, and very good reward to risk in a bearish outlook.
USD/CAD - Look for a Clear-out, then Short (7/25)
We got the pop up as anticipated, and price is now starting the week in the 1.08-1.0820 narrow range. There is still some near-term upside risk before price will be challenged by key resistance factors. Then if price stalls below 1.0850, we should consider shorting around 1.0835.
USD/CAD Daily Chart 7/29
Looking at the daily chart, you can see that the market is still bearish despite the run-up in July from 1.0620 to 1.0820. The USD/CAD is now testing a falling trendline that connects the 1.1053 and 1.0960 pivots. Price is also testing the 200-day SMA, first time as resistance since crossing below it in June. Ability to hold as resistance offers a "slingshot" bearish signal. The downside risk extends to the 1.0588 level (2014-low) down to the 1.0560, Dec. 2013 consolidation support pivot.
A break above 1.0850 however could be a sign that USD/CAD is not bearish. It is not a bullish signal, but suggests that the market could be in consolidation, and that the 1.0620 is the support in this consolidation structure, while the resistance has yet to be established.
With that said. Let's examine a sell at 1.0835, with a stop above 1.0850 (ie. 1.0875), and a target of 1.0620, though we know there is potential for a lower low within the bearish mode present in the daily chart. This conservative target offers a reward to risk of 215:40, a better than 5:1 reward to risk. Note that this is a conservative target for a bearish outlook. However, for a sideways outlook, the 1.0620 is the aggressive target.
In the consolidation mode, the conservative target, if we respect July's rising trendline, would be the 1.0760 area. This offers a reward of 75 pips, and thus a reward to risk ratio that is slightly below 2:1. Then the 1.70 area is a key support/resistance pivot would be the medium-expectation. This offers a reward to risk of 135:40, which is slightly better than 3:1.
It appears that if you have your stop at 1.0875, a sell at 1.0835 has decent reward to risk in consolidation outlook, and very good reward to risk in a bearish outlook.
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