Two days ago, I wrote about USDCAD.
I was waiting for a daily close above a descending channel that extends from the year-to-date high.
That structure, in my opinion, illustrates consolidation following the parabolic move from earlier this year.
In other words, it’s a continuation pattern.
But as I mentioned on Monday, USDCAD buyers need to secure a close above the channel top to confirm the breakout.
I’m referring to either a daily or even 4-hour close above resistance.
As you can see, the USDCAD tried to break that channel resistance on Tuesday and again earlier in Thursday’s session.
However, buyers failed to close the pair above the level.
That means the 1.4240 area remains intact as resistance as of this writing.
But it doesn’t mean I’m selling USDCAD.
I still like the idea of a break higher eventually.
So, here’s how I’m approaching the USDCAD for now:
If USDCAD closes above channel resistance, which is near 1.4240 currently, I will look to buy the pair for a move to 1.4650 with a break there exposing 1.5000.
On the other hand, a close below the short-term trend line from last Friday’s low would signal weakness.
It may even open the door to the key support area between 1.3760 and 1.3800.
That said, I’m only interested in buying USDCAD.
In fact, I opened a starter position this morning, which I also announced in the member forums.
I will add to that position following a close above channel resistance.
Alternatively, I will exit the position if we see USDCAD close below trend line support just above 1.4100.
As you can see, the risk to reward here is asymmetric, and that’s a good thing.
Keep in mind that oil executives will be meeting at the White House on Friday, which could shake things up for the Canadian dollar.