Technical Chart and Candlestick Patterns: USDCAD forms hanging man followed by 3-black crow patterns at 1.3637 and 1.3370 levels respectively (refer daily chart ).
While both leading oscillators ( RSI and Stochastic curves) show downward convergence to indicate the strength in downtrend and the intensified selling momentum. To substantiate this selling sentiment, MACD’s bearish crossover also indicates downswings to prolong further.
These bearish patterns coupled with intensified bearish momentum nudge the current price way below DMAs (i.e. the straight 5th week low) to signal the extreme weakness of this pair.
On a broader perspective, the intermediate trend spikes through ascending channel pattern, bearish engulfing pattern pops-up at channel resistance (at 1.3370 levels) to take the price slides below 7EMAs (refer monthly plotting).
For now, more slumps likely on the overbought pressures as both the momentum oscillators, on this timeframe, show downward convergence to the prevailing price slumps.
Trade Tips: On daily trading grounds, at spot reference: 1.3278 levels, we advocate constructing tunnel spread, using upper strikes at 1.3303 and lower strikes at 1.3229 levels. The strategy is likely to fetch leveraged yields as long as the underlying price keeps dipping but remains above lower strikes on the expiration.
Alternatively,ahead of BoC monetary policy that is scheduled for this week, contemplating above technical rationale, we advocate initiating shorts in EURCAD futures contracts of Jan’19 delivery as further downside risks are foreseen and simultaneously, longs in futures of Mar’19 delivery for the major uptrend. Thereby, one can directionally position in their FX exposures. Thedirectional implementation of the same trading theme by further allow for a correlation-induced discount in the options trading also if you choose strikes appropriately.
Currency Strength Index: FxWirePro's hourly CAD spot index is flashing at 61 (which is bullish ), while hourly USD spot index was at -118 ( bearish ) at 12:03 GMT .
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