Last week, the USDCAD fell sharply and although through 2 days this week and a few hours, the momentum lower may have slowed a bit, the trend lower remains intact. Trends are fast, directional and tend to go farther than traders expect or think. As a result, if buying a dip, it is important to lean either against a key support level, or wait until the price action extends – in this case – back above a broken level.
In the USDCAD, the pair fell below a swing area between 1.3455 and 1.3477. Within that area is the 61.8 retracement. That is on the topside. It would take a move above that area to tempt me to buy. That can come on a move above 1.3455, but if the price momentum does not continue, GET OUT.
On the downside, a swing area between 1.3398 and 1.3414 is the next downside target. I would not buy unless until that area is reached or approached. Even so, I would put a stop below the 1.3398 level.
Overall sellers remain in control. So that is the favored trade bias. However, at some point there will be a bounce. So be aware but be sure to respect the trend if tempted to buy (i.e. , have a meaningful stop like the ones outlined above)
This article was written by Greg Michalowski at www.forexlive.com.
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