The USDCAD pair forms an ascending triangle ahead of the GDP release later today. Moreover, the bullish pattern might be interpreted as part of a pennant formation – another clue that the pair’s recent strength will likely continue.
These days it is all about the U.S. election and the USD. That is normal and likely to remain this way all the way until the election day. Depending on the outcome and who will get the two chambers of Congress – the House of Representatives and the Senate, the USD will react differently.
For example, if the Democrats get both Chambers and the Presidency, it becomes easier to pass the fiscal stimulus, to fund infrastructure programs, etc., and the USD is likely to weaken in the long term.
But the USDCAD scenario presented here is forming on the hourly chart. Because of the market’s uncertainty ahead of any election, especially one so important as the current one in the United States, it is wise to look at the lower timeframes for trading setups.
Both U.S. and Canadian GDP Releases Are Due Today
In a few hours from now, just after the ADP (i.e., private payrolls) number comes out, the GDP from both the United States and Canada are released. Any deviation from the expected numbers will likely create volatility on the USDCAD pair. If we add the ADP to the mix, the chances are that we will find out soon if this ascending triangle on the hourly chart breaks higher or not.
USDCAD Technical Analysis
The measured move of an ascending triangle equals the triangle’s longest segment, projected from the horizontal base. In our setup, it leads to 1.3520.
However, if the triangle is the consolidation area of a pennant, the pennant’s measured move leads to 1.37 or more. To trade both patterns, bulls need to place a pending buy-stop order at 1.3430 and have a stop at 1.3350. By the time the market reaches 1.3520, bulls should book half profits and move the stop to break-even, while letting the other half going for the pennant’s measured move.