The_Blacksmith

USD CAD - A possible Triple Play?

FX:USDCAD   U.S. Dollar / Canadian Dollar
A Triple Play on Baseball is when three baseman from the team on defense manage to eliminate three offensive players that are trying to reach their bases, closing the inning. We have an analog situation here on the USD CAD, where we have 3 setups on sight at the same time.

The first one is in the daily chart , a Descending triangle in orange, that if manage to pull a breakout, (with volume ) has as target the price level of 1.33565, with a stop-loss placed above the downtrend that validates the triangle pattern .


The second and third one comes from a Double top at the Monthly chart, formed by the first top in January of 2016 (1.46899), and the second one in February of 2020 (1.466740).

Bullish Scenario: If the price manages to break out above these levels we might have a significant bullish movement ahead, considering its importance on the chart. The target for this situation is unclear for now, but if the price goes this way I will post a target in an update, once a clear movement shows up.

Bearish Scenario: However, if this Double Top confirms its Bearish bias by breaking the level of (1.20613), the USD CAD tends to bleed out to (0.94552) that would be the target of the Double Top pattern.


This study aims to serve as a map to the pair since the breakouts mentioned above can heavily impact movements on lower time frames.

Now let's look into the current situation of the Canadian economy to try to have a better understanding of the movements that the chart is presenting to us, on my profile here on the Tradingview you already can find a long term study about the DXY , so I'm gonna skip the U.S Dollar situation on this study.


The Canadian Dollar is the short/medium term has some key upper hands over the U.S Dollar ( Bearish for the USD CAD), mostly because how the country has been handling the Coronavirus crisis, managing to flat the infection and death curve, more efficiently than its neighbor the United States, that holds the Worst Place on the crisis, surpassing more than 1.5 million infected and with almost 100 thousand deaths , the Canada success lies on the united response from the government, the conscientization of citizens in respect the public health and the Canada characteristic of having a low density of population. This success in the combat of the pandemic has made the Canadian consumer confidence recovers faster than the U.S, showing that the Canadian economy it's turning in an attractive place for investments now.


In the long run, Canada still slushing to show real signs of economic recovery ( Bullish for USD CAD), since the Canadian economy was already weakening before this pandemic, partially because of the lack of unit under Trudeau administration, since he didn't manage to obtain the majority in the Canadian Parliament in the last elections and that it's creating a lot of politics noisy, which difficult to attract foreign investment. The Bank of Canada is other responsible for this situation since the Governor Stephen Poloz has follow half of the steps of Jerome Powell on FED, to assist the economy, considering that Poloz has cut the CAD interest rate at the same rate of the U.S, without the level of stimulus that the U.S government is injecting behind. Creating an environment of shock, since the abrupt rate cuts and lack of further meaningful monetary police left Canadian banks acting on their own to try to balance the reality. Situations that put the Canadian economy in a bitter spot right now, and significantly increases the challenge ahead for the country to recover.


So, looking at all these facts we can conclude that the most likely plays to come out here it's the Descending Triangle since the short term looks bullish for the Canadian economy, but in the long term for now the Bullish breakout of the Double top looks more feasible to happen. We can expect the Bearish Scenario of the Double top , only if Canada manages to make a significant change in its economic perspective now.

Alert: May 29, 2020 - its an important day for the USD CAD, since the Canadian government will unveil several important GDP data, that cand heavily impact the movement of the price. After the results come out I will make an update here to analyze if changed the perspective of the study


Summary of this study:

1- Descending Triangle: Target -1.33565; Stop - Above downtrend.

2 - Double Top ( Bearish outlook): Target - 0.94552; Stop - Above 1.20613 (look for an SMA to place in a safer place)

3 - Double Top ( Bullish outlook): Target: Unknown; Stop- Below the double top 1.46674 (Same rule here, look for a technical point below this level)


Please feel free to share your comments and perspectives below, I'm still grinding my way to improve my analysis, so all feedback is welcome.


"A baseball game is simply a nervous breakdown divided into nine innings." - Robert Earl Wilson
Trade active: Descinding Triangle: Active
Comment: We are close to the target, so the hint here is don't be greedy if you see a reversion and want to take profits or put a tight trailing stop, it might be a wise move.
Comment: Descending Triangle : Target Reached;
Profit: 493.9 pips

Comments

here is my MTA on usdcad, I have it on watchlist as well
+1 Reply
The_Blacksmith transparent-fx
@transparent-fx, Great study my friend, USD CAD is holding great opportunities lately =)
Reply
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