The U.S Dollar is the winner of recent price action in the Forex market. The USD is taking charge and moving ahead with full steam. Are there signs of dangers ahead or is the USD strength tradable?
From the fundamental perspective traders can expect a relatively quiet week but there are a couple of events that deserve our attention such as the NZD interest rate decision on Wednesday, Bank of England’s (BOE) Governor Carney speech on Tuesday and Thursday, and European Central Bank’s (ECB) President Draghi speech on Wednesday.
From the strength versus weakness analysis it becomes apparent that the EURUSD short, NZDUSD short, USDCAD long, USDJPY long, and AUDUSD are the best currency pairs to trade the USD strength. Considering the fact that the EURUSD, NZDUSD, AUDUSD http://winnersedgetrading.com/a-look-at-the-aud-and-nzd/, and USDJPY have already been recently reviewed, today’s post focuses on trading the USD strength against the CAD.
TRADING THE USDCAD
The long-term uptrend is an obvious fact. However, recently price struggled with continuing in that uptrend because price action failed to break the candle high 5 weeks in a row. The main question is whether this is a pause within the uptrend or a sign of weakness and exhaustion. What do you think?
In my opinion, a couple arguments support the upside trend continuation:
- USD strength is dominating the Forex market (see images above);
- Price is using the bottoms (purple circle) around 1.24 as support levels;
- Last week’s weekly candle closed bullish with a close near the high.
Typically a momentum should not hesitate too long with trend continuation. I am expecting the USDCAD to break above the 1.28 top either this or maximum next week, or else consider the probability of an uptrend continuation to be significantly lower.
ENTRY DETAILS FOR USDCAD LONG
The daily chart shows the breakout (blue) towering above the contracting triangle (orange line). The breakout candle looks strong with a decent sized body and a close near the high.
Although it is tempting to enter a long setup simply based on the closure of the breakout candle, the presence of a bigger resistance level (red) nearby increases the need to have patience. Better entries are either:
- The retracement of the candle (light green circle);
- The retracement back to the broken trend line (blue circle);
- The breakout above the resistance (dark green circle).
TARGET AND EXITS
Any stop loss should go below the bottom (purple) and triangle support (green). Considering the presence of a round level, it would be better to go a few pips below 1.24 (red).
The target is the aimed at the Fibonacci level (blue) at 1.3070 (blue circle). This is the -27.2% Fibonacci target of the previous swing high and swing low where price stopped at the 38.2% Fib and built a wedge.
What do you think of the USD strength?
If you are looking to long the USD this week, against which currency pair do you think it has the best odds and most space?
Let us know below! Thanks for reading and sharing.
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