Good afternoon traders,
If you follow the blog, you’ll remember that we were speaking about the resistance level that USD/CAD was pressing at, heading into the Bank of Canada’s decision.
Well the BoC subsequently hiked and USD/CAD lurched down out of resistance as a result. A nice setup whether you were a purely technical, or a fundamental trader. Give that previous link a click and have a look at the narrative that we’ve been following.
Now back to the present barely a few weeks later and will you look at that. Price is right back against the resistance level that we rejected after the decision:
This is where things get interesting again!
The thing that I like to say in price action situations like this is that resistance has held… until it hasn’t held any longer. Pretty straight forward, right?
But knowing when resistance has held is the hard part. Unless you’re a highly aggressive trader, you don’t want to be blindly buying any resistance level like this you see. Unless you have specifically tailored risk management techniques, this is just asking for trouble.
Draw up the resistance zone above on your daily chart and then zoom into the intraday charts to look for any short term signs of the level holding. Those being a lower low or a retest of previous short term support as resistance.
If you add this extra step to your support/resistance trading, you’ll save yourself the pain of jumping in front of momentum moves.
Best of probabilities to you!
Dane Williams – Vantage FX
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Source: Vantage FX Blog