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Trading the USDCAD Triangle- Weekly Opening Range in Focus

By , Currency Strategist
17 March 2014 17:17 GMT

Talking Points

  • USDCAD trading near highs of multi-month consolidation pattern
  • Weekly opening range in focus- break to offer conviction scalp bias
  • Event risk on tap from US & Canada this week

USDCAD Daily Chart

Forex-Trading--the-USDCAD-Triangle--Weekly-Opening-Range-in-Focus_body_CAD_DAILY.png, Trading  the USDCAD Triangle- Weekly Opening Range in Focus

Chart Created Using FXCM Marketscope 2.0

Technical Outlook

  • USDCAD in consolidation formation after breaking multi-year TL in January
  • Key resistance 1.1130/57- bearish invalidation
  • Breach targets objectives at 1.1223/38 & 1.1300
  • Support 1.1030, 1.0970- bullish invalidation
  • Broader outlook constructive above 1.0825/30
  • Daily RSI challenging 50-break (bearish)
  • Key Event Risk: FOMC Interest Rate Decision on Wednesday, US Existing Homes Sales on Thursday & Canadian Retail Sales & CPI on Friday

USDCAD Scalp Chart

Forex-Trading--the-USDCAD-Triangle--Weekly-Opening-Range-in-Focus_body_CAD_Scalp.png, Trading  the USDCAD Triangle- Weekly Opening Range in Focus

Notes: Last month we highlighted an outside day reversal ahead of key support at 1.0905 that shifted our attention back to the topside of USDCAD. The resulting rally achieved two of our three objectives before failing at the 1.1157 target. The March open looks to have formed just below this region and while our broader outlook remains weighted to the topside, we cannot rule out at test of the multi-month consolidation pattern we’ve been in since the January high. Bullish invalidation has now been brought up to 1.0970.

The immediate focus is on the weekly opening range which we’ll define as 1.1030/40 – 1.1106 (taking into account key 6.18 ratios just below the NY low). Note that there is significant event risk on tap this week with the FOMC policy decision on Wednesday and key Canadian data prints on Friday. We’ll respect a break-out of this range heading into the end of this week while noting that a downside break of the consolidation pattern would shift our attention down towards 1.0905 and key support at 1.0825/30.

A minor trendline dating back to the monthly low gave out overnight and we’ve now rebounding off it as resistance. We seem to be carving a short-term embedded channel off last week’s high and near-term the momentum remains heavy with an RSI resistance trigger pending as a warning on short exposure. Bottom line: we favor the broader topside play but if the weekly opening range low gives out, we may have another low to make before heading higher. Follow the progress of this trade setup and more throughout the trading week with DailyFX on Demand.

* It’s extremely important to give added consideration regarding the timing of intra-day scalps with the opening ranges on a session & hourly basis offering further clarity on intra-day biases.

Key Threshold Grid

Entry/Exit Targets

Timeframe

Level

Significance

Resistance Target 1

30min

1.1077

38.2% Retracement

Bearish Invalidation

30min

1.1106

23.6% Retracement / Weekly ORH

Break Target 1

Daily / 30min

1.1125/30

61.8% Ext / Jan 31st Close

Break Target 2

Daily / 30min

1.1157

100% Ext / (March High 1.1152)

Break Target 3

30min

1.1187

88.6% Retracement

Break Target 4

Daily

1.1223/38

2014 High / 50% Retracement / 100% Ext

Break Target 5

Daily

1.1300

March 2006 Low / Pivot

Bullish Invalidation

Daily / 30min

1.1030/40

61.8% Retrace & Ext / Last Wk’s Low / Wkly ORL

Break Target 1

30min

1.0999-1.1005

61.8% Fib Ext(s) / 100% Ext

Break Target 2

Daily / 30min

1.0970/76

78.6% & 76.4% Retracement(s)

Break Target 3

30min

1.0954

Monthly ORL

Break Target 4

30min

1.0930

1.618% Ext

Break Target 5

Daily

1.0905

50% Retracement

Break Target 6

Daily

1.0825/30

61.8% & 38.2% Retracement(s)

Average True Range

Daily (20)

75

Profit Targets 17-19pips

*ORH: Opening Range High

*ORL: Opening Range Low

Other Setups in Play:

---Written by Michael Boutros, Currency Strategist with DailyFX

For updates on this scalp and more setups follow him on Twitter @MBForex

To contact Michael email mboutros@dailyfx.com or Click Here to be added to his email distribution list

Join Michael for Live Scalping Webinars on Tuesday-Thursday morning this week on DailyFX Plus (Exclusive of Live Clients) at 12:30 GMT (8:30ET)

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17 March 2014 17:17 GMT