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Fan Yang

USD/CAD - Strong Support Above 1.28

USD/CAD is still bearish since retreating from 1.46 after cracking this handle early in the year. As oil prices stabilized and rallied, so did the Canadian Dollar. The correlation is well documented. Meanwhile, the USD has been sliding as the FOMC steps on the breaks on its rate-hike campaign. 

USD/CAD Daily Chart 4/4

(click to enlarge)

You have heard the phrase "don't catch a falling knife" or "the trend is your friend". This would deter someone from buying USD/CAD now, but let's examine the chart a little further. 
1) It is no longer a falling knife as the bullish divergence between price and the RSI suggests slowing bearish momentum. 
2) Yes, it was a bearish trend since mid-January. However, the mode in the higher time-frame has been bullish since July 2011.
3) Furthermore, the 1.28-1.29 area involves common supports and resistance levels going all the way back to early 2015. 

Given these conditions, it is viable to consider a buy in this 1.2850-1.29 area, or even a little higher.

This type of trade is based on reward to risk. It is not a buy during a confirmed up trend, so we have to temper our bullish outlook to about 1.32. We can however keep partial position if price does reach 1.32, in case there is a strong bullish correction to 1.34. But let's not expect the market to just reverse from here. It might eventually, but from a trading perspective, we have to limit our expectation to the possibility that there will be a prolonged sideways mode. 

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