At the moment, “No trade” is the best trade for CAD traders. It is a game of patience for both bulls and the bears. Here is why –
The rising trend line was breached on January 12. However, the spot found fresh bids around 200-DMA back then, owing to which it moved back above the rising trend line… only to fail at the 50-MA on January 20 and fall back to 1.3050 levels on January 26.
Since then, the bird has been restricted largely in a narrow range of 1.3060-1.3150.
One may be tempted to short USD/CAD (buy Canadian dollars) on account of the bearish daily RSI, MACD and due to the fact that the pair failed at 50-DMA and once again breached the rising trend line support.
Furthermore, we also see a falling tops formation (1.3598 – Dec high, 1.3387 – Jan 20 high).
We can also see a double top formation with a neckline support of 1.3074.
Still, the bears need to be patient as the 200-DMA has begun sloping upwards; we are yet to see a falling bottom formation i.e. the spot needs to breach the recent low of 1.3010.
Only a daily close below 1.30 would add credence to – breach of rising trend line, falling top formation, double top reversal and a potential bearish 50-DMA and 100-DMA crossover.
For the bulls to make a comeback, it is essential that the spot closes above 1.34. Moreover, one may attempt buying USD/CAD (selling CAD) on failure to hold below 200-DMA, although this is a risk trade and warrants strict/tight stops.