Developing story
USD/CAD has found demand on a monthly support area which gives rise to an opportunity to target resistance as the five-month consecutive waterfall trend starts to correct.
The following flow of charts illustrates how the trade setup has been determined and why it offers a high probability opportunity for a favourable 1:3 risk to reward ratio.
Starting with the monthly chart, we can see that the price has indeed been rejected month after month and has picked up a bid at a strong level of support.
Monthly chart
Weekly chart
From a weekly perspective, the 1.34 area is likely to be a keen area of supply for which to target, but the highest probability trade on the table, for now, is found on the daily setup.
Daily chart
As illustrated, the price is correcting Wave 1 which offers the opportunity to target the 1.33 psychological level of Wave 3 as the price retraces to support structure.
4HR buy limit order
As the moves in to test the support structure, a buy limit will trigger the entry for a 1-3 risk to reward ratio.
The price action will be monitored from a 4HR timeline from entry to exit.
The positing should be managed with a stop loss that is moved to breakeven as soon as there is a new support structure formed above the entry.
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