Transcript of Video
Hello everyone, this is today’s video analysis for December 13, 2018. Today we’re taking a look at the US Dollar versus the Canadian Dollar [USDCAD] for today’s trade analysis.
This currency pair has been in an uptrend for the past several weeks. You could see the two red trend lines. Rising trend channel that we’ve been studying in the live Trade Room for quite some time now as the market has continued to rally and rise here for the USDCAD. We’ve seen strength for the USD sending this higher. We’ve seen oil falling, which has sent this currency pair higher.
It’s been quite a perfect storm for this currency pair as we do see when oil – crude oil – falls. That’s really not great news for Canada and that drives this particular currency pair higher. We see positive news for the US and positive momentum for the US, and that sends this higher as well. So, it’s been kind of a perfect storm. We could see that continue if the USD rallies again, or oil continues to break new lows, and we could see this continue to go higher.
The other side of that is since the USD has been in such a rally, if that decides to turn around, we could see this break this trend and start to move lower, or if oil starts to turn around and rally again and start to go up, we could see this break the bottom of this trend and start to move lower as well.
So, there’s some outlying caveats that we need to pay attention to if we’re going to be trading the USDCAD. But let’s look at some of the technical aspects of this currency pair as we decide hey, what are we going to do with this. Well, first off, again, the two red trend lines showing the rising trend. Within this trend, we’ve seen periods of pullbacks, and I’ve highlighted them with several of the black lines, where it’s pulled back to the bottom, back to the top, and it’s bounced around between the two red lines quite a bit.
It attempted to get out underneath it a couple of weeks ago. We attempted to dip underneath there, but it was a short-lived dip and turned right back above and rallied to a new high. And now we’ve come back down into support. The orange-shaded area right around 1.3340, 1.3320 is the main area that we’re focusing in on. We look back to the past real quick. Back where the black circle is. Left-hand side of the chart.
You could see resistance at that same orange-shaded area. Resistance. Orange zone helping us identify the future as support now that it’s above it. So, that’s interesting for us. 1.3340, 1.3320 acting as support, but historically it was resistance. So, that gives us a clue that that’s the area we want to watch for. Let’s go ahead and zoom it in one time. Let’s go in twice. So, now you could see six days now we’ve been bouncing around.
Blue zone as resistance. That’s closer to the 1.3375, 1.3390-level, is the blue-shaded area. So, that’s our current significant resistance. Most of the candle bodies have found resistance around there. Sure, we’ve spiked to the green zone a couple of times as the peak highs, but most of the bodies finding resistance into the blue zone. Again, we already know support sitting here at the orange zone.
So, the main focus here is if the trend is going to continue, if we’re going to see the rising trend, USD rallies, oil starts to go back down again, we would look for this to find support at the orange zone. Rally to the blue zone, green zone, or eventually even making a new high above the green zone. Your risk in that scenario is that it breaks the orange zone and goes lower. So, that’s really what we’re watching, is what’s going to happen if all of that is that true. Then we look for opportunities to buy as closest to the orange zone.
Why do we want to buy close to the orange zone? That provides lower risk. Your risk in that scenario is a stop loss under the orange zone, because if it breaks there, you probably don’t want to stay into it. What’s it going to cause it to break 1.3320? Again, the USD decides to fall off, reverse, and go down, or oil starts to rally. That’s good news for Canada. And if oil does rally and good news for Canada, this currency pair breaks the orange zone and starts to pressure lower.
So, we’re watching all of those things. But if you’re a buyer, if you’re considering a long shot, then the orange zone, 1.3340, 1.3320. You buy there. You have a stop loss underneath it. You target the blue zone. Of course we know the blue zone is resistance. That’s why I say buying closer to the orange zone is at least better risk-reward. You target the blue zone. You target the green zone or higher.
Now, if you’re thinking about selling it, I think it’s still tough to sell above the orange zone. Even if it’s at the blue zone, I think it’s tough to sell above the orange zone, because we’re still well within the uptrend. So, I don’t think selling right now, going short, is really the main objective even though, again, we possibly could see a reversal here because it’s been going up for such a long time. I just don’t think there’s really good evidence or reason to sell.
In fact, we might even look at this as somewhat of just a consolidating pattern. If we just take a triangle and put it in here like this, we look at this as somewhat of a consolidating pattern, where we see rising lows along that red trend line there. We see falling highs along the top. So, at some point, it’ll be a breakout scenario. Break the blue zone, sure, we start to look for it to head higher. Break the orange zone, we’ll start to look for it to go lower.
Until we get that breakout and a new trend develop, either continuation of the uptrend or reversal to a downtrend, I think we look for long opportunities into the orange-shaded area for the time being for the USDCAD.
From Forex Traders Daily, this has been your daily analysis with Ross. If you would like to get Ross’ analysis on all the currency pairs he’s watching and all the trades he takes today, join him in his live Trade Room by clicking on the link below. Please leave any comments you have about today’s video in the comment section below.