Free Profitable Forex Newsletter
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USDCAD: Potential For A Bearish Breakout
The USDCAD pair fell notably in the last 4 weeks, dropping from 1.3400 a month ago to the 1.3000 area. The Fed pressed on further down the dovish road recently while solid Canadian data has kept the Canadian Dollar firm.
The Bank of Canada meeting was held last week and while the central bank expressed some concerns about the economy, Canadian policymakers don’t have as many reasons to be worried as other central banks.
As a result of all this, the USDCAD pair was pressured lower and remains so into the 1.3000 support area. The dovish shift at the US Federal Reserve and the performance of the Canadian and the US economies suggest USDCAD can fall further. Fair-value estimations of the pair also suggest that the pair should be trading 500 pips lower based on fundamentals.
The technicals also are turning bearish also and now USDCAD is a step away from breaking 1.3000. The rising channel, as shown on the chart below, was broken a few weeks ago when the price pushed below the 1.3200 level.
If 1.3000 is broken, the next big support lower would be at the 1.2500 area. Ahead of it, the 1.2700 - 1.2800 area will likely act as a support zone also.
To conclude, the situation on USDCAD looks interesting at the moment and potentially good bearish opportunities will be provided if the 1.3000 area is broken to the downside.
The weekly chart provides a good view of the situation and we show it below.
Noting some risks to bearish USDCAD view
We are not going to give a specific trade plan for this potential opportunity yet as we need to see how things will develop from here.
Note, however, that USDCAD 100% Fibonacci extension of the first bearish leg once it reaches the 1.2950 area (1.2967 level exactly). This is a potential risk to be aware of if you plan to enter a short trade on a bearish breakout below 1.3000.
Quite often, Forex pairs can reverse after a 100% Fib extension is completed, but of course, that doesn't mean that USDCAD will do so this time. Watching the price action around 1.3000 and around the 1.2967 Fib level will likely provide valuable clues for whether USDCAD will be continuing lower or bottom out around these areas.
Trade signals from the past three weeks
Week June 17 – June 21, 2019
- June 21, 2019 – Long EURUSD from 1.1370 (on a bullish breakout), stop tightened and taken out at 1.1340 (July 1) = -30 pips
Period June 26 – July 12, 2019 - No Newsletters sent
TOTAL: -30 pips in the past three weeks
TOTAL: +1100 pips profit since October 1, 2018
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