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Faraday: Shorting USDCAD

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Thomas Light from Faraday Research has spotted a possible short trade in USDCAD after a key support level was broken last week following the Bank of Canada’s rate decision.

Based on the daily candle chart, 1.2380 had been a key line in the sand for USDCAD for several weeks. But that changed after the Bank of Canada last Wednesday decided to keep its overnight lending rate unchanged at 0.75%  - even if a new forecast showed the Canadian oil-dependent economy has stalled.

Thomas Light says: “The break and close below support confirms that a double top reversal pattern is now in place and that we could well see further weakness. We expect previous structural support to be used as new resistance going forward and Friday’s bullish hammer candle suggests that we may well see a retracement back up into 1.2380s this week.”

If this happens, Thomas Light will be looking to get short in anticipation of a retest of the lows on Friday.