USD/CAD Stalking Rally to 1.10; Risk Assessment

• 15-min: This is an immediate followup of today’s post, Stalking USD/CAD as it Tests 1.10. This of course has not happened, as the pair is at the 1.0820 area. In the 15-min chart we can stalk this rally close and find confirmation of continuation, or clues of reversal.
• At the moment, price action shows a struggle to rally above 1.0850. The momentum has stalled.
• However, in this correction is an opportunity to check the shift in momentum. Looking at the RSI, a positive reversal coming out of a “w” pattern above the 50 level is a good sign that bulls are still in charge.
• The RSI is above its SMA5 at the moment, after it crossed back up following the “w” pattern. This is an indication that the market is NOT ready for a reversal.
• Below are Risk assessments for 2 scenarios.
• Scenario 1: 2nd leg of correction goes to 1.0780 area.
  Theoretical entry trigger @ 1.0820 after failure to break below 1.0780.
  Using 2 ATR from powerline, the R/R for scenario 1:
  1.1050-1.0820 / 1.0820-1.0735 = 230/85 = 2.7
• Scenario 2: No 2nd correction leg. Market breaks above 1.0850 high and offers
  throwback. Theoretical entry trigger at 1.0880.
  Using 2 ATR from powerline, the R/R for scenario 2:
  1.1050-1.0880 / 1.0880-1.0810 = 170/70 = 2.48

Fan Yang
Currency Analyst
Commodity Trading Advisor

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