Last week, USDCAD fell sharply. Although the downward momentum has slowed somewhat over the past two days and hours this week, the downward trend remains. Trends are fast, directional and tend to move ahead of traders' expectations and beliefs. Therefore, if you are buying on the dip, it is important to either lean on a major support level or wait until the price movement rises above a breached level (in this case).
On USDCAD, the pair has fallen below the swing area between 1.3455 and 1.3477. Within that area there is a retracement of 61.8, which is the upper limit. I need a move above that area before I would want to buy. That could happen with a move above 1.3455, but if the price momentum does not continue, I will exit.
On the downside, the swing area between 1.3398 and 1.3414 is the next downside target. I won’t buy until it hits or approaches that area. Even then, I would place a stop below the 1.3398 level.
Overall, sellers are dominant. This is the favorable trading bias. However, at some point there will be a pullback. So, be careful, but if you are tempted to buy, make sure you respect the trend (i.e. place meaningful stops as mentioned above).
USDCAD is on a downward trend
