Good evening team,
I have been watching the USDCAD for a reversal opportunity this week and it appears to be setting up right now. Crude oil may continue to recover due to the OPEC oil report coming out over the next 24 hours. Furthermore, the US reports the next round of inflation data tonight. A higher-than-expected reading may suggest inflation being more persistent and increase the risk of an earlier tapering timeline from the Fed (bullish DXY). However, we see the larger reaction coming to the downside. IF there is a miss on the forecast the rally on the DXY this week may have been an overreaction. The market has been pricing in a positive result throughout the week therefore even if the result is in line there could be limited upside for the DXY.
USDCAD – 1 Hour Chart
There is a very symmetrical head and shoulders structure on the USDCAD. If you take a look across the board the GBPUSD is setting up a possible inverse head and shoulders and the EURUSD has reached a double bottom support zone. This indicates USD weakness may come into play tonight.
Trade Setup: SELL Market execution, current price 1.2533, stop loss 1.2603 and take profit targets 1.2427-1.2307.
Stop loss: 70 pips
Take profit: 106-226
Keep risk management nice and tight on this one as we are trading against the USD.