Trade idea - Taking profits on US dollar, trading USD/CAD

Two trade ideas from Chris Weston.

Source: Bloomberg

US dollar index - I suggested long US dollar basket trades on 5 May at 93.20 and I am now keen to lock in profits (+1.5%) here with price rolling over. I will move to the side lines and look to buy back in on a move above 9,500.

USD/CADUSD/CAD traded in a textbook downtrend since early February, naturally helped by general weakness in the USD, but specifically stronger oil prices. As we can see from the daily chart price broke through downtrend resistance on 4 May and rallied to $1.3015 on 9 May. After a period of consolidation the pair traded to $1.2771, but importantly the buyers came in and rejected these levels and help push price back above a series of 2015 pivot low around $1.2830.

The trade seems clear and patience is needed. With price consolidating in a $1.3015 to $1.2770 I am happy to wait for a daily close through either side of this range as this should set off a new trend. The fact that the nine-day RSI is right in the middle of the range (currently 55) shows the lack of trend. I favour upside given oil prices are looking a touch over extended, but the momentum is such that I certainly wouldn’t be shorting crude. One to put on the radar, and when price dictates the trade will come to traders. Buy the break, whichever side that may be.

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