The USDCAD price has reached a key resistance level. Will this provide a short-term trading opportunity?
We’re going to take a look at USD/CAD as there could be a short-term reversal trading opportunity in this market.
We bought USD/CAD last week, with our main target at the 1.2465 level which came through nicely. We chose that area because the market found support there. It’s also the previous weekly structure low, so we expected the market to retest that area.
Now, the market is in an overall downtrend. I would expect some reaction. Although, I am still expecting the weekly trend to continue at this point.
If the daily timeframe closes similarly to how it is now, then we’re going to get a retracement, a shallow pullback to the structure area at 1.23, and only then can we look for a short-term trading opportunity.
I’m targeting the 1.23 level because the price stalled there before. I’m anticipating a move to it, a change in trend on a lower timeframe, and a continuation to the upside. Although, on impulse and retracement phases, we get two different things.
The USD/CAD price retested the major weekly swing low at 1.2465 and is starting to decline. This isn’t a surprise considering that the price rallied over 300 pips last week. When the price does this, we should expect a short-term retracement. This means we could see the price drop back to the support level of 1.2300 before continuing the upward move.
In the four-hour timeframe, we should look for the trend to change because the market impulses to the upside. The market will make higher highs and higher lows as it forms a retracement phase.
We need to identify an area where a lower high could come into the market. And that could come in at previous structural layers around 1.2440. If the price rallies but forms low ranging candlesticks, then that could be a sign that we could see a lower high forming. That could give us a short-term trading opportunity at the 1.23 level.
If the 1.23 level gets hit beforehand, then we could look for a challenging trend like a double-bottom pattern or a reversal. But ultimately, we’re looking for a short-term trading opportunity.
If we see a reversal, we should expect the four-hour timeframe to form lower lows and lower highs. If the price forms a pullback with low ranging candles, we could anticipate a continuation to the support at 1.2300.
We’re looking for a short-term trading opportunity because there’s been a large-scale expansion, about 30 pips, last week. The markets usually retrace after a big move like that. We went from the 1.21’s to the 1.24’s, so we could see a pullback to that move.
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