FxWirePro: Buzzing USD/CAD bears on bearish engulfing pattern and failure swings at channel resistance – Trade debit put spreads

USDCAD bears are activated on the streaks of bearish patterns as CAD caught between trade war storm clouds and hiking central banks.

Engulfing pattern candlestick has occurred at 1.3141 levels after failure swings at stiff resistance (refer daily chart). Consequently, the strong support is broken below as the prices slid below DMAs with the bearish crossover.

Both RSI and stochastic curves show downward convergence to the prevailing price dips that signal strength and intensified bearish momentum.

While trend indicators (DMA and MACD curves) show bearish crossovers that indicate the downtrend to prolong further.

On a broader perspective, the intermediate trend has been edging higher through rising channel pattern so far (refer weekly terms); however, the shooting star pops-up exactly at the channel resistance plummets prices below 7EMA, further weakness signalled by both momentum oscillators on this timeframe as well.

Well, despite the today’s rallies, bears nudge below 7-DMA. For now, more slumps seem to be on cards upon bearish DMA and MACD crossovers and intensified bearish momentum.

Trading tips: Contemplating above technical rationale, on trading perspective, debit put spreads are advocated as the selling indications are piling up on the weekly graph. Thus, in order to arrest bearish risks and to optimize strategy, shorting an out-of-the-money put option is recommended that reduces the cost of trading by financing long position in buying in-the-money puts.

Execute strategy by adding long in 2w (1%) in the money -0.69 delta put option and short 2w (-1%) Out-Of-The-Money put option for the net debit.

Currency Strength Index: FxWirePro's hourly USD spot index has shown -83 (which is bearish), while CAD is flashing at -53 (bearish), while articulating at 11:07 GMT.

For more details on the index, please refer below weblink:

http://www.fxwirepro.com/currencyindex