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
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Weekly chart
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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
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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
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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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