Thanks to the rising U.S. Bond yields, a number of major FX pairs have recently reversed their trends. The USD/CAD has so far resisted the U.S. Dollar’s pressure because of rising oil prices (Canada’s major export commodity). If the U.S. Dollar continues to rise against other currencies, the downtrend for the USD/CAD will likely end, as well.
In fact, there have already been some tentative bullish reversal signs for this pair.
The USD/CAD weekly chart, below, shows a possible bottoming formation on the FX pair. Although there was no immediate upside follow-through after this large weekly hammer was formed a couple of weeks ago, the selling pressure wasn’t very strong last week, either:
Source: TradingCandles.com and TradingView.com
The daily chart, below, shows an inverted hammer created Friday, but so far in today’s session, there’s been no downside follow-through. If anything, it looks like the breakout sellers who are looking to short the pair below Friday’s range may have been trapped.
Source: TradingCandles.com and TradingView.com
If the above observation is correct, then price can now rip higher to take out the bears’ stops, with some of these orders likely resting above Friday’s high and others above the prior week’s range.
The USD/CAD has been one of my favorite pairs to trade short, but it looks like the tide is now turning. The Trading Candles private group made a few really good trades on the USD/CAD recently, like this:
Before:
Source: TradingCandles.com and TradingView.com
After:
Source: TradingCandles.com and TradingView.com
Another USD/CAD trade that worked very well for the private group is below:
Before:
Source: TradingCandles.com and TradingView.com
After:
Source: TradingCandles.com and TradingView.com
Now that the tide is potentially turning for the U.S. Dollar, shorting the USD/CAD may no longer work. So, going forward, I’ll likely be actively looking for bullish setups on this pair as the existing long-term bear trend appears to be nearing its end— if it hasn’t already ended.