Markets are as indecisive as ever ahead of Christmas weekend.
There’s a case for both dollar strength and weakness in the coming weeks, which makes conditions as tricky as ever.
However, USDCAD is one pair that has formed a near-perfect breakout opportunity for the new year.
But this is still just an opportunity and not a confirmed setup. Those are two very different things in the world of trading.
An opportunity means the market is setting up in a way that will produce a potential trade soon, but patience is still required to wait for confirmation.
As mentioned earlier this week, USDCAD has traded within a massive 2,600 pip channel for years.
The pair tested channel support in 2021 and has been trending higher since.
So we know that momentum is with bulls. That’s an important distinction as it helps us determine which side of the market we should be on.
That said, waiting for a confirmed breakout is just as important when dealing with a terminal pattern like the one below.
USDCAD is bouncing from trend line support today at 1.3590, so shorts are ill-advised while that holds.
At the same time, longing USDCAD right now is risky with 1.3700 resistance intact.
Therefore, it’s imperative to wait for USDCAD to either close below the November 16th trend line or above the 1.3700 horizontal level before acting.
A 4-hour close above 1.3700 would confirm the ascending triangle and open up the measured objective at 1.3970, which is also the October high.
Alternatively, a 4-hour close below trend line support would expose 1.3500 and potentially the recent swing low at 1.3226.
