By Chloe Edwards

The US dollar continues to weaken, leaving many traders wondering how long the trends can continue before seeing a correction. Gold is at an all-time high with investors continuing to flock to this safe haven stalwart and yielding plentiful trading opportunities to the upside, and we can still see strength in the Australian dollar. Today, however, I will be looking at USDCAD for an opportunity to trade what could potentially be a newly established downtrend.

Looking at the daily chart of USDCAD above, I can see that price has recently broken below the horizontal support/resistance level at 1.3314 (shown in purple), and the next possible level of support could be the 1.3050 level below (shown in pink).

Looking more closely at this daily chart, I notice a downtrend in place, with lower highs and lower lows in price action. There is bearish geometry, with the 10, 20, 50 and 200 exponential moving averages (EMAs) having just lined up in the correct order and pointing in the direction of the downtrend (with the exception of the 200 EMA, which has not yet caught up as the new downtrend developed). On this timeframe, I will be awaiting a further move to the downside over the next few days, before looking for a pullback up to the sell zone around the declining 10 and 20 EMAs.

This could then coincide with the potential resistance level around 1.3314, where I will be looking for a small bearish candle to print in this area for a potential short opportunity. I will also look to the lower timeframes to find potential trading opportunities, as this may offer the benefit of finding a higher reward to risk opportunity than trading on the daily timeframe, and/or an earlier entry.

On the four-hourly chart above, I can see a downtrend in place, with price action forming lower highs and lower lows, and the 10, 20, 50 and 200 EMAs lined up and showing good bearish geometry. The MACD and RSI indicators are both trending downwards and therefore converging with price, suggesting that there may be further momentum to the downside. The combination of this price action and the indicators suggests to me the potential for possible short trading opportunities on this timeframe. I will be waiting for a pullback into the area around the 10 and 20 EMAs, which may coincide with the 1.3314 horizontal level. If this happens, I will be looking for a small-mid-sized bearish candle to print around this area, giving me a potential short opportunity.

Stay safe and healthy, and happy trading.


Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.