FxWirePro: USD/CAD bearish engulfing and black-crow patterns develop failure swings at channel resistance, hammer struggles for momentum

Technical Chart and Candlestick Patterns: As stated before in our recent post of USDCAD, the formation of hanging man followed by 3-black crow patterns at 1.3637 and 1.3370 levels respectively has plummeted the prices convincingly (refer daily chart). While bearish engulfing candle at 1.3370 levels (on weekly) has also signaled weakness of this pair. All these bearish patterns caused failure swings at ascending channel resistance.

Ever since then bears managed to nudge prices below DMAs &EMAs from last three weeks. But for this week, the pair has halted bearish streaks and attempts to bounce back on the formation of hammer candle at 1.3263 levels. But bullish momentum seems unlikely.

While both leading oscillators (RSI and Stochastic curves) show downward convergence to indicate the strength in the downtrend and the intensified selling momentum. To substantiate this selling sentiment, MACD’s bearish crossover also indicates downswings to prolong further. 

On a broader perspective, major uptrend likely to prolong further but more slumps likely on the overbought pressures in the minor trend.

Trade Tips: One daily trading grounds, at spot reference: 1.3265 levels, we advocate constructing tunnel spread, using upper strikes at 1.3299 levels and lower strikes at 1.3223 levels. The strategy is likely to fetch leveraged yields as long as the underlying price keeps dipping but remains above lower strikes on the expiration.

Alternatively, contemplating above technical rationale, we advocate initiating shorts in EURCAD futures contracts of Jan’19 delivery as further downside risks are foreseen and simultaneously, longs in futures of Mar’19 delivery for the major uptrend. Thereby, one can directionally position in their FX exposures. The directional implementation of the same trading theme by further allow for a correlation-induced discount in the options trading also if you choose strikes appropriately.

Currency Strength Index: FxWirePro's hourly CAD spot index is flashing at 145 (which is bullish), while hourly USD spot index was at 27 (mildly bullish) at 12:50 GMT.

For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex