USD/CAD has been trending upward since the middle of 2021. However, current technical analysis and sentiment hint it could be headed to the downside.
USD/CAD is getting ready for a fall
The currency pair failed to rise to the previous resistance at 1.4000, making a U-turn at 1.3700. Now, it’s possible that a huge 123 pattern is being formed, suggesting at least a 300-pip move lower in the near future. There is a lower high (number 3 in the chart) in the making as well, slowly confirming the upcoming price decline.
USD/CAD weekly timeframe, source: tradingview.com, author’s analysis
The daily timeframe clearly shows how USD/CAD rejected to rise past 1.3700 as it filled the gap at 1.3679. The break of the trend line, on the other hand, confirms this might be the direction in which USD/CAD could be headed – to the downside.
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A stoploss at around 1.3670 should be sufficient, while a profit target could be placed approximately at 1.3200, where there is also a 200-day moving average (EMA 200). There is a potential for more than 300 pip gain on this trade. Moreover, a weak US dollar might be helpful in this trade as it’s declining since October against all the other fiat currencies.
USD/CAD daily timeframe, source: tradingview.com, author’s analysis
The four-hour chart shows a crucial trend line has been broken, confirming the upcoming selloff on this currency pair. This timeframe also formed a 123 trading pattern, which has already been broken along with EMA 200.
USD/CAD 4H timeframe, author’s analysis, source: tradingview.com
As the new year is right around the corner, traders may experience higher volatility, so this trade may hit a profit target by early 2023. However, make sure to place your stoploss and profit target when you enter the trade as these tools will help you to navigate better.
Shortsellers getting ready for 2023 be like pic.twitter.com/l6ZE8i7lT4
— Investro.com (@investrocom) December 27, 2022
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