Last week, we caught a nice long setup on USDCAD following the breakout from the late April trend line.
With both targets hit, a pullback was likely, especially given the significance of 1.3650.
Fast forward to today, and USDCAD is entering the demand zone I mentioned in Saturday’s Weekly Forex Forecast video.
However, patience is needed.
Instead of buying blindly and hoping for the best, waiting to see how the pair reacts at 1.3540 and 1.3490 is a better approach.
Pairs like USDCAD love to “overshoot” critical support and resistance.
So a reaction from the exact levels on your chart is unlikely.
Remember, these are areas, not exact levels.
Armed with that information, I’m watching how USDCAD reacts at 1.3540, but also 1.3490 and 1.3440.
Watching three different support levels for a buying opportunity may seem confusing, but remember that I’m waiting for a favorable reaction first.
A bounce and reclaim on the higher time frames would be ideal.
Why 1.3490 and 1.3440?
The former is the 50% retracement of May’s candle, and the latter is the 50% of the monthly wick.
Both levels are also critical price action zones on the daily time frame.
Watching the US Dollar Index (DXY) and the 103.50 yearly open is also a good idea.
Last Friday, I wrote how a DXY pullback from 104.20 was likely.
Here’s what I wrote:
With that in mind, I wouldn’t be surprised to see the DXY range for a few days between 104.20 and 103.50 next week.
That’s exactly what we’re seeing this week.
Considering where the DXY is trading relative to 103.50, pairs like USDCAD may pull back for a few more days.
That means USDCAD is a waiting game for now, but I still think we will get the retest of the March 2020 trend line near 1.3800 in the coming weeks.
It’s just a matter of waiting out this pullback.