The greenback is on the move thanks to the Federal Reserve, creating textbook technical setups across the major USD pairs.
With USD volatility likely to stay up for a minute, USD/CAD will be a pair to watch with clean technical setups potentially in play to attract orders this upcoming session.
USD/CAD 1-Hour Forex Chart by TradingView
Remember that directional biases and volatility conditions in market price are typically driven by fundamentals. If you haven’t yet done your fundie homework on the U.S. dollar and the Loonie then it’s time to do some work by checking out the forex calendar and stay updated on daily fundamental news!
If you have done your fundies homework and got your biases and volatility expectations, then it’s time to move to the charts!
On the one hour chart above, we can see USD/CAD was stuck in a range for most of December, bouncing back and forth roughly between 1.3550 – 1.3600. This range was actually below its daily average true range of around 67 pips, signaling that traders were waiting on the sidelines for a major catalyst to pick up sentiment and volatility.
Well, that day came with the final FOMC statement sparking a USD selloff across the board, which broke the consolidation in USD/CAD. USD/CAD dropped to the previous swing low around the 1.3500 major psychological handle, where it seems to be stabilizing for now.
Where the pair goes to next will likely depend on how the Asia and European markets price in the FOMC news and upcoming top tier U.S. events, but if you’ve done your homework on the pair and you’re a bear, arguably the best setup to watch with solid R:R potential is a bounce back to the range. If resistance and bearish reversal patterns form there with bearish fundamentals, the odds are pretty good of drawing in sellers.
If so, and sellers take control, a move below the 1.3500 major psychological handle could be in the cards, potentially as low as the 1.3440 – 1.3460 area before profit taking buyers step back in.
If you expect upcoming U.S. data to be bullish for USD/CAD, then watching the current levels for sustained support and bullish reversal patterns should head to the top of the watchlist, as buyers could jump in and take back control if U.S. data does surprise to the upside to draw in fundamental buyers.
The previous broken range would likely be where sellers may step back in to take profit for this scenario, but again, it’s likely up to the fundies on how high a bullish bounce could go.
But what do you think? Will the previous swing low draw in buyers or are USD bears back to push USD/CAD lower straight into the weekend. Drop a comment below and share your thoughts and what type of risk management strategies would you use on this pair!