CAD Triangle FX Trades

Hello Forex traders,

As promised yesterday the primary focus of today’s article will be on the Canadian Dollar. What can Forex traders expect of the USDCAD in the upcoming days and weeks?

Before we dive into the expected price movements till the end of the year, make sure to check out yesterday’s analysis on the AUDUSD and the trade ideas in this link (Double Trend Trap).

USDCAD

The very first conclusion a Forex trader can make is that the USDCAD currency pair is a slow mover – or at least for the last few years.  From 2002 to 2007 price dropped by an impressive 7,000 pips, then recovered 4,000 in 1,5 years, and then dropped again another 3,500. However, ever since 2010 a range environment has been prevalent on the long-term charts with slow grinding moves up and down.

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BREAK OF WEDGE

This lack of volatility might end soon. Price is pushing up in a neat up trend channel (purple) and could be close to breaking the triangle (dark red) to the upside.  From a similar perspective price could also be in an ascending wedge. A break of the resistance levels could lead to a decent wide open space to the upside and a trending environment might gain traction. The best trade is to wait for the break out to occur and a hook back to the broken level. The pullback would preferably be a slow, bull flag corrective chart pattern.

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EURCAD

Obviously when trading the EURCAD, it would be wise to keep an eye on the price development of the USDCAD. Will the USDCAD indeed break the resistances (CAD weakness) or will it use it as a barrier with more range or a reversal back down (CAD strength)? That answer will certainly influence the EURCAD.

Also the EURCAD is very close to long-term resistance and has been moving very nicely in an uptrend channel. Will the trend continue or will the resistance prove to be too tough to break? This pair is at a bounce (down) or break (up) spot as well.

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BOUNCE OR BREAK

The potential bounce off of the resistance is something that I would only trade when price action actually confirms the bounce by breaking out of the uptrend channel (blue) to the downside.

The break out above the resistance is with the trend and therefore a more appealing option to trade. Here too a break above resistance and a pullback is always the smart play. The space to the -61.8% target, however, seems to be quite limited at 1.4680. With that in mind, only trades on a smaller time frame would probably have sufficient reward to risk potential. Plus with a target nearby, price could also move up very correctively. In that regard, there is more space between the -61.8% target  and -100.0& targets.

GBPCAD

The GBP is the strongest of the 3 currencies mentioned today because it has clearly broken out of its 3 year tight consolidation. Almost all targets get “respected” by price, which means that price will make some type of correction before potentially continuing with the trend. Price did the same for the -27.2% target but the correction was short lived as the uptrend continues. The next target is the -61.8% Fib at 1.75.

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On the daily chart price has just hit its -27.2% target. This could cause the currency to pause or retrace. A pullback to the bottom of the uptrend channel (purple) and a hook back to the broken tops (orange) would seem like the best place to look for longs up that 1.75 level.

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Thank you for sharing this article! Good Trading!

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