The USDCAD (Read more about Canadian Dollar) has rallied after briefly trading inside of its support area which is marked in light blue in the above H4 chart. The rally was magnified as the Canadian Dollar was exposed to bearish factors from the Bank of Canada cut in interest rates while the US Dollar was boosted by hawkish statement out of the US Fed. The rally has taken the USDCAD into its resistance area which is marked in light grey from where a sideways trend is expected.
Forex traders are likely to realize floating trading profits after the sharp rally which can lead to a profit taking sell-off. The Bollinger Band Indicator has support the strong rally with the lower band, the middle band and the upper band all sloping to the upside. The USDCAD is trading between the middle band and the upper band and the upper band is trading above its resistance area. A breakdown below its middle band is expected over the next few sessions.
Forex traders are advised to enter short positions at 1.2975 and above which would position their trading accounts for the expected sell-off in the USDCAD. Conservative forex traders should wait for the confirmation of a shift in momentum from neutral to bearish which is achieved by a breakdown of price action below its middle Bollinger Band. A take profit target of 1.2300 has been selected for a potential trading profit of 675 pips.
Forex traders should protect this trade with a stop loss level at 1.3200 for a potential trading loss of 225 pips which will result in a Risk-Reward (RR) ratio of 3.00.
USDCAD
Short @ 1.2975
TP @ 1.2300
SL @ 1.3200
RR: 3.00
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