Long Trade Idea
- Long entry after a bullish price action reversal on the H1 timeframe following the next touch of $1.3800, $1.3750, or $1.3646.
- Put the stop loss 20 pips below the local swing low.
- Move the stop loss to break even once the trade is 20 pips in profit by price.
- Remove 50% of the position as profit when the trade is 20 pips in profit by price and leave the remainder of the position to ride.
Short Trade Ideas
- Short entry after a bearish price action reversal on the H1 timeframe following the next touch of $1.3905 or $1.3977.
- Place the stop loss 20 pips above the local swing high.
- Adjust the stop loss to break even once the trade is 20 pips in profit by price.
- Take off 50% of the position as profit when the trade is 20 pips in profit by price and leave the remainder of the position to run.
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The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.
USD/CAD Analysis
The USD/CAD currency pair has been in a bearish trend since peaking at a multi-year high last January. Recent days have seen it continue within this trend but with slower momentum, as evidenced by the shallow bearish price channel produced by the linear regression analysis within the price chart below. One of the reasons why the momentum has been slowing is likely to be this strong zone of support between $1.3800 and $1.3700. This area is a good candidate to produce a major bullish reversal, so a speculative long following a firm bullish bounce here could be a good long trade entry.
The US Dollar has begun to recover over the past couple of weeks after falling within a long-term bearish trend, as the Federal Reserve holds firm despite pressure to cut rates. Markets do not foresee the Fed rushing to cut, even following the surprisingly negative Advance GDP data released last week. This could keep the greenback from falling much further. The Canadian Dollar is relatively strong as commodity currencies enjoy a comeback, but as we get closer to July the tariff question will rear its head again and very likely will cause volatility and some surprising and wild price swings.
Technically an interesting point has been reached, with the recent multi-month low price rejecting a point very close to a key support level at 18.44 which is confluent with 18.50. The price has been rising from near this level today after making a u-shaped bottom.
Above, there is a clear key resistance level at 18.74.
I think the best approach here would be to look for a quick long trade if we get another bullish bounce following a test of 18.44 or even 18.50, or a longer-term short trade if we get another failed test from below of the resistance level at 18.74.
Strong bearish reversals at 18.59 or above 18.82 could also be interesting short trade entries.
There is nothing of high importance due today regarding the Canadian Dollar. Concerning the US Dollar there will be a release of ISM Services PMI data at 3pm London time.
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