Stalking USDCAD Long
Well, the story of the week so far in the Forex market has been the Canadian Dollar weakness. We have seen some strong trends across most pairs so naturally that's where we are focusing our attention on for now.
The Canadian pairs that are moving particularly well include EURCAD, GBPCAD, CADCHF and USDCAD. The pair that we want to take a closer look at today is USDCAD.
The main reason for wanting to look at USDCAD instead of any of the other pairs is that USDCAD is less overextended from its moving averages. As you can see on the Daily charts below EURCAD has had a much more explosive move higher than USDCAD which also means that it's allot more overextended from what we call the buy zone (zone between the 10 and 20 period moving averages) and therefore more due a pullback to the buy zone. USDCAD is still slightly overextended but still not as much as EURCAD.
So how do we go about finding a high probability setup to join USDCAD on a possible move higher? Well here at Trade with Precision we teach three high probability trading strategies and the one that looks the most likely to setup here is the Trend Flow strategy.
Drilling down to the lower timeframes we are now looking for Price to be back in the buy zone (between the 10 and 20 period moving averages) and for a small bullish candle to close and provide us with our precise point of entry. You can see on the 240 minute chart below that price is just touching the 10 period moving average. What we ideally want to see is price pull back deeper into that buy zone and hopefully reject the big number of 1.6000 which is detailed by the blue horizontal line. At that point the confirmation chart which is the 480 minute chart will also be back near the buy zone which is an essential factor for the Trend Flow strategy. From there what we will be waiting for is a small bullish candle to close on the 240 minute chart which is our Trigger chart. The entry will be 1 pip above that candles high with a stop below the swing low.
If price doesn't pull back to the 1.6000 level then we will still be stalking a trade long if a small bullish candle sets up however we will want to see price getting closer to the buy zone on our 480 minute confirmation chart. Let's watch this chart closely to see how the trade plays out.
Happy Trading!
Regards,
The TWP Team
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