Friday’s economic data showcased US inflation back on track at 1.3% YoY, but slightly weaker on the month at 0.4%.  (Previous month 0.6%).

For the USD/CAD, we could see a short term drop to 1.31500 before the next rise as the Canadian dollar looks to shadow the Oil drop.

USD/CAD

Key Points:

  • Price holding above the 200 EMA
  • Currently price within 50 EMA zone – Must watch on opening few hours to access behaviour.
  • 4 Hour – Trend line intact.
  • IF: Price drops to 1.31500, this would cluster at the 200 EMA + September trend line. This cluster zone will provide us possible signals of accumulation.
  • A break below trend line and breach of 1.31350 would suggest the price may fall further.
  • RSI has broken 50 mid-point and trend line.
  • 50% Fibonacci cluster with 1.31500 (September 4 low to September 9 high)
  • It’s extremely important to watch price behaviour at the trend line.

Key Levels:

Support – 1.31350, 1.31500, 200 EMA, 1.31620

Resistance – 1.32020, 1.32300, 1.32680

Entry Zone:

Optimal entry provides the greatest reward to risk ratio while supporting entry is a zone for reversal signals.

Optimal Entry – 1.31500

Supporting Entry – 1.31620

Candle Reversals for entry

  • Bullish Hammer
  • Bullish Engulfing
  • Bullish PiercingCandlestick

 

The Risk:

As traders, it is your job to mitigate the risk and only trade structures that provide high probability and great reward to risk ratios.

If you are not comfortable with defined exit levels, experiment with Moving Averages to help set solid exit rules to protect your capital.

IF: Price breaks below 1.31265 and violates 200 EMA– this would suggest the structure is not in our favour and would be wise to reduce exposure or close the trade until a solid signal gives us reasons to re-enter.

Reward / Reward Targets:

Optimal Entry 1.31500 – Target 1 1.32020 = 2.3x Reward to Risk

Optimal Entry 1.31500 – Target 2 1.32300 = 3.5x Reward to Risk

Optimal Entry 1.31500 – Target 3 1.32680= 5x Reward to Risk

 

Supporting Entry 1.31620 – Target 1 1.32020 = 1.1x Reward to Risk

Supporting Entry 1.31620 – Target 2 1.32300 = 2x Reward to Risk

Supporting Entry 1.31620 – Target 3 1.32680 = 3x Reward to Risk