The USDCAD has entered a downtrend phase in which is created a set of lower highs which can be seen by the formation of a descending resistance level in the above chart marked in black. While the USDCAD did create the lower highs, price action was unable to break down to the downside which in turn has increased bearish pressures in this currency pair. The lower Bollinger Band has acted as a support level which reversed sell-offs and pushed the USDCAD into its resistance area.
Forex traders should look for short positions in the USDCAD between 1.2580 and 1.2620 as the increase in bearish pressures together with ongoing economic disappointments out of the US are expected to lead to a breakdown in this currency pair which is now being pressured by its descending resistance level. A breakout above this strong resistance area is not expected and short positions remain in favor, especially during rallies.
Forex traders may also opt to realize floating trading profits and close their long positions at very attractive levels. This will add to the expected sell-off in the USDCAD. The downside potential for this short trade is very attractive while the upside remains limited. A breakdown below the middle Bollinger Band will attract new short orders in this currency pair. A take profit target of 1.2000 has been selected for a potential profit of 590 pips.
Forex traders should protect this trade with a stop loss level at 1.2700 which will result in a Risk-Reward (RR) ratio of 5.36.
Short @ 1.2590
TP @ 1.2000
SL @ 1.2700