Although the EURUSD hit the SL, I still believe the DXY is set for an extension to the downside. The DXY has broken down from a rising bear flag/wedge formation which indicates a bearish trend. We are looking to get back into the short USD trade here on the USDCAD. I may look to reload the EURUSD later this afternoon as well. The US inflation data is not until Friday morning, therefore the DXY has time to run to the downside before the major economic data release. The equity market looks set for a recovery rally and we will be looking to buy into an index later this evening, additionally, all JPY pairs are running higher in a risk-on sentiment. With this in mind, the DXY should decline due to the decreased demand for the safe-haven currency.
DXY – Technical Analysis
The DXY has broken down from the rising channel structure, as well as the bear flag formation. Price action has also retested the channel formation and appears to be heading south. As you know we have been waiting for the DXY to turn south and we are beginning to assume the bull trend has now changed. We will be looking to short the DXY moving forward unless the DXY breaks back inside the rising channel structure.
USDCAD – 1 Hour Chart
Trade Setup: SELL USDCAD, market execution, current price 1.2690, stop loss 1.2765 and take profit 1.2565.
Stop loss: 75 pips
Take profit: 125 pips