Trading opportunities for currency pair: the dollar has rebounded from the 50% limit, the trend line and the lower limit of the channel. On the weekly a hammer or pinbar (reversed candle) has formed. If the dollar hastens after the correction, then consider the 1.2350-1.2400 region as something like a price zone.
The last review I did on the Canadian was on 6th April. Back then there was a double peak on the weekly. Weak NFP stats were a signal for traders that the US Fed wasn’t going to raise rates in the near future.
In that idea I considered a break in the 1.2390 – 1.2350 zone of support and a drop in the rate to 1.2012. A close higher than 1.2650 cancelled the scenario of a reduction in the rate. Before falling, the USD/CAD reached 1.2666. The scenario wasn’t cancelled out since the day closed lower than the 1.26 level. On 29th April the USD/CAD rate reached 1.1944. The target was reached.
Weak US economic data and a growth in the price of oil have allowed the dollar to correct itself by 50% of growth from 1.1190 to 1.2834. Now we’ll have a look at why I’ve chosen the USD/CAD this week.
I want to bring your attention to the weekly candle. On the daily I’ve put a section from the weekly graph. The week closed hammer. Its other name is a Pinocchio Bar, or pinbar. Traders use this name in Price Action strategies.
A pinbar is an excellent setup (pattern or candle pattern) for dollar purchases against the Canadian dollar. The bigger the nose, the more reliable the pinbar. The pinbar is a reversed setup, but it doesn’t always come off as highly accurate. The candles with long shades don’t guarantee it coming off 100%.
When using pinbars, the best setups appear when they are rebounding from significant price levels (fibo, pivot). This is why I’ve chosen the USD/CAD, since the dollar has bounced back from the 50% support, the trend line and the lower limit of the channel.
About the channel. Look at the graph. I’ve made a line through the 1.2798 and 1.2834 peaks and I’ve inserted a parallel line at the 1.2351 minimum. Through the 100% lower I’ve put another line (2 canals from the upper line).
When trading according to a pinbar, traders use pending orders. If the nose is heading upward – a SellStop, if down – a BuyStop. In our case the nose is heading downwards, so we’ll use a BuyStop order. The order should be put above the upper shade of the candle plus 2 points at 1.2206. Trading period zone: 1.2350-1.2400.
The primary protective stop is set at the pinbar’s minimum minus 2 points. At the close of each subsequent candle, the stop loss will shift to a new minimum minus 2 points. Doing this will help to gradually lessen the size of losses. Before implementing this strategy, weigh up your risks. Not every weekly bar will allow a stop at 264 points. In order not to miss the trade, you can reduce the lot and observe all the rules of risk management.
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