The Weekly Update: No Rest for the US Dollar

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USDCAD Technical Analysis

We will begin by writing this was a relatively tough decision. As we stated last week we are expecting the US Dollar (USD) to resume its weakness against a basket of currencies in the Foreign Exchange (Forex) market.  Our recent EURUSD trade was stopped at the entry after we were able to liquidate profits over the long trade. As you may already know we are not keen on re-entering trades that were stopped out and only do so under specific circumstances.

We were debating between USDCHF and USDCAD. The difference between the two currency pairs is that USDCHF is based on the daily chart while USDCAD is based on the monthly, possibly weekly chart. We chose to focus on USDCAD, which does not require a monthly close in order to enter.

USDCAD Monthly Chart

Please click on the chart to enlarge:

USDCAD Weekly Chart 22/11/15

USDCAD Weekly Chart 22/11/15

USDCAD Trading Strategy

The entry is based on the monthly chart but can also be taken off the weekly chart. The negative divergence that is noted in the technical indicators such as the MACD is an early indication USDCAD may retrace lower. The fact the price was unable to close above the resistance, which would have painted the third wave may have affirmed a classic double-top reversal pattern.  The risk is that the price will paint the third wave before retracing lower, which is why we employ the monthly chart that provides a fair entry into the market.

By taking USDCAD trade it means we are expecting the weekly resistance to hold. As this is a weekly/monthly entry we cannot determine whether trade will be in a decent profit this week or next week after the monthly close. We have to use both charts, weekly and monthly as either chart on its own is insufficient to provide an entry.

There are 2 possible targets for the weakness we are anticipating for USDCAD. 1.2825 is the initial target of the retracement. We are opting for the latter target, which is 1.2438 as there is room to believe moderate selling are due for the pair. If however we note 1.2825 is sustaining the price if it is tested by the market we may decide to exit the trade.

We are not planning to layer the protective stop outside the bearish wedge (in black). We will use the monthly stop to layer the stop. We hope for a gap higher in USDCAD when the market opens.

There could be many reasons for USDCAD weakness such as a rebound in crude oil. The Fed decision is December may be the key fundamental trigger.

The trade alert’s details will be emailed after 22:00 GMT and then updated to this page.

USDCAD Trade Alert Details

Please click on the chart to enlarge:

USDCAD Weekly Chart II 22/11/15

USDCAD Weekly Chart II 22/11/15

USDCAD short at market price (1.3343)
Take profit: 1.2440
Protective stop: 1.3587
Risk Ratio: 1 : 4 (approx.)
Estimated duration: 60 days

24/11/15 UPDATE: USDCAD is trading at 1.3003 at the time of this writing. This is merely the beginning of a broader weakness based on the monthly chart. We should highlight that on the daily chart the price has posted higher highs and higher lows, which means USDCAD could trade back at the entry if not beyond.

Please click on the chart to enlarge:

USDCAD Weekly chart 24/11/15

USDCAD Weekly chart 24/11/15

This is not a guaranteed scenario but we are willing to tolerate it should it occur. We need to gain approximately +100 pips in order to shift the stop to the entry. We are nevertheless for risk management reasons close 10% of the short trade at market price.

08/12/15 UPDATE: The sharp fall crude oil took its toll on the Canadian Dollar (CAD), forcing substantial gain in USDCAD that triggered the protective stop loss order of the long trade. We have sent numerous updates on USDCAD until the trade was stopped out by the market.

The Weekly Update: No Rest for the US Dollar
As USDCAD long trade is closed this page can now be accessed by all traders. Open trades are restricted to members only. We have been providing trade alerts in the Forex market since May 2014.
The Weekly Update: No Rest for the US Dollar

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The Weekly Update: No Rest for the US Dollar

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The Weekly Update: No Rest for the US Dollar