FxWirePro: USD/CAD Triangle Breakdown Indicates Interim Bears On Upper Hand, Buzzing Bulls In Major Trend – Trading & Hedging Setup

As stated in our previous post, USDCAD bears are intensified upon breakdown below triangle support.Bearish engulfing patterns nudge prices below DMAs with bearish crossover, it has been constantly dipping ever since the spinning top occurrence at the peaks of 1.4512 levels, any abrupt rallies could be deceptive to struggle to get support from both the leading and lagging oscillators (refer daily chart).

For now, bears managed to breach below triangle support decisively, both leading & lagging oscillators are in tandem with the prevailing price slumps.

Minor downtrend remains intact as long as the current price maintains below DMAs as bearish DMA & MACD crossovers indicate bearish trend continuation. Both RSI and stochastic curves show downward convergence to the price slumps.

However, it is unwise to buck the major trend which is bullish and unwise to activate fresh shorts for the long-term as you could see the 2nd chart.

On a broader perspective, the major uptrend that was spiking through the uptrend line so far, though the failure swings were observed at the peaks of 1.4667 levels the bears attempt to create some downside traction but they appear to be vulnerable in the major trend.

For now, as it has signalled only momentary weakness as the current price slides below 7 & 21-EMAs, one can think of some trading ideas using boundary strikes.

Overall, we continue to reckon that further downward pressure on the USD will emerge momentarily as the H1 of 2020 develops. Key resistance now is 1.4155 and major resistance is 1.4667. We target a drop to 1.3816 (at least) and 1.3730 in the medium term.

Trading tips: At spot reference: 1.3480 levels (while articulating), boundary options strategy is advocated using upper strikes at 1.3584 and lower strikes at 1.3363 levels. One can achieve certain yields as long as the underlying spot FX remains between these two strikes on the expiration.

Alternatively, we recommended directional hedges that comprised of longs in USDCAD futures contracts of July’20 delivery, simultaneously, shorts in futures of June’20 delivery for arresting bullish risks in the major trend. The short leg has been delivering desirable hedging objectives due to the price dips in the short run. One could be able to directionally position in their FX exposures with this strategy on hedging grounds.