We are currently witnessing a interest rates battle between the United States Federal Reserve and the European Central Bank. When Europe recently announce a raising of the EURO interest rate, the US Federal Reserve followed suit and raised interest rates on the dollar as well. In a press release from the middle of last week, the Federal Reserve made public its decision to raise the interest rate from .25% to .5%, the first increase in years.
With all this battling back and forth, it is better to hold your trades for this major currency pair and wait for a clearer picture to develop.
However, as the exchange rate trends between the two major economic powers on either side of the Atlantic remain ambiguous. We do see an interesting development occurring in North America between the US and Canadian Dollars (USD/CAD). Based on a strong correlation with oil prices, USD will likely increase to a price of 1.3935 against the CAD.
First, let’s take a look on a ‘naked’ chart – a chart without any indicators – to see a clear picture of the currency trend.
As shown on the chart above, the USD/CAD exchange reached the upper band of the daily trend:
Now let’s add some indicators: MACD, Stochastic, Bollinger bands (3.0; 2.0) and moving average. With the indicator displayed on the charts let’s move up to a weekly time frame:
On the above chart we can clearly see three significant indicators:
The most significant indicator is where the weekly candle is completely between bollinger band 3.0 and 2.0 on the far right. (It is marked by the top most yellow arrow.)
Pay attention to the diversion between the chart trend and the MACD indicator – despite there being a bullish trend to the currency, the MACD is following a bearish trend.
Lastly, the stochastic indicators are above 80 with a cross between K & D lines. This indicates a strong sell opportunity.
Sell Sell Sell!!
Without a doubt, USD/CAD is the best opportunity among all the currency pairs at the moment. All you need to do is look for the right setup to place your sell trade with any time frame you choose and prepare to sell orders.
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Have a successful week.