Six consecutive red daily candles for USD/CAD and a spike up in Oil has caught the attention of Forex and Commodity traders alike.
The above USD/CAD daily chart was one that Oscar Goullet brought up on Twitter yesterday and for me, was too good to ignore.
As you can see, price is in a higher time frame bullish trend on the weekly chart (you can zoom out yourself), while sitting inside a bullish channel on the daily.
Intra-day however, price has pulled back to channel support.
The risk:reward on the scenario I’ve drawn onto the above 30 minute chart is quite tight and is one trading idea on the currency pair. If price can break the magenta line, a re-test of short term support would coincide with channel support being re-activated, and looks the spot for an entry.
As we’re trading in the direction of the overall trend, once price has tucked back into the original bullish channel, the upside on the higher time frames opens up considerably.
Just a quick footnote following on from some headline expectations in Oil that we had on Friday.
Oil has continued its march North into resistance where we will look for price to take its first breather. Once again, this is the higher time frame level to look to manage your risk around.
However, attached to the above Oil chart you can see we have included the Correlation Matrix found in the Vantage FX Smart Trader Tools add-on for MT4 which shows an extremely high reading. With the USD/CAD scenario looking like it’s going to be the one to play out first, managing correlation risk also comes into play and taking multiple highly (inversely) correlated trades isn’t sound risk management.
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On the Calendar Tuesday:
AUD Monetary Policy Meeting Minutes
GBP CPI y/y
EUR German ZEW Economic Sentiment
CAD Manufacturing Sales m/m
USD Building Permits
USD CPI m/m
USD Core CPI m/m
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Dane Williams – @VantageFX
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