USDCAD appears to be forming a rising trend channel on its 1-hour forex chart, as the pair recently made higher lows and higher highs. Price just bounced from the 1.0950 minor psychological level, which lines up with the channel’s bottom, and might be on its way to test the range resistance at 1.1200.
However, stochastic is indicating overbought conditions and hinting that the mid-channel area of interest might hold as resistance for now. If that happens, USDCAD could retest the bottom of the channel which is closer to the 1.1100 major psychological support for now.
A bounce from this area could still lead to a strong rally to the top of the channel but a breakdown could be a sign that the uptrend would reverse. Going long at 1.1100 with a stop below 1.0950 and a target of 1.1200 could yield a decent return-on-risk for a simple day trade.
The event risks for this setup are minimal, as there are no major events from the US or Canada today. Bear in mind though that latest inflation figures from Canada came in strong but BOC Governor Poloz downplayed these reports. Meanwhile, US data has mostly surprised to the upside and confirmed that the Fed could move closer to tightening policy.
By Kate Curtis from Trader’s Way