USDCAD: a Bearish Bat Close to Completion
In a surprise move, the Bank of Canada cut their interest rate last week. This pair immediately rallied upon the release of that news. Tonight, the FOMC stated the timeline of any rate increase would depend on economic data. This statement seems to have given another boost to this pair, bringing the price close to the potential reversal zone (PRZ) of a bearish Bat on the 30M.
When defining the PRZ for a Bat pattern, we look at the projection of three harmonic levels. I: the 886 retracement of XA, II: an extended AB = CD pattern (in this case 1272 AB = CD) and III: a BC expansion (in this case 2272 BC). This defines a very tight zone, about 5 pips wide, represented by the orange lines in the chart. There is also some structure near this zone, which increases the edge of a reversal. Should price action test the PRZ and reverse convincingly, I would enter short. SL goes 10 pips behind the next resistance level. TP1 = 382 retracement of AD and TP2 = 618 retracement of AD.
There are 66 pips to be made (if this pair follows the script) and the trade has a reward – risk ratio of 2.9!
UPDATE: Price action did not reverse in or near PRZ and broke and closed above X. According to my rules, this Bat was invalidated. No problem, there was no entry signal so nothing was lost. On to the next trade!
When defining the PRZ for a Bat pattern, we look at the projection of three harmonic levels. I: the 886 retracement of XA, II: an extended AB = CD pattern (in this case 1272 AB = CD) and III: a BC expansion (in this case 2272 BC). This defines a very tight zone, about 5 pips wide, represented by the orange lines in the chart. There is also some structure near this zone, which increases the edge of a reversal. Should price action test the PRZ and reverse convincingly, I would enter short. SL goes 10 pips behind the next resistance level. TP1 = 382 retracement of AD and TP2 = 618 retracement of AD.
There are 66 pips to be made (if this pair follows the script) and the trade has a reward – risk ratio of 2.9!
UPDATE: Price action did not reverse in or near PRZ and broke and closed above X. According to my rules, this Bat was invalidated. No problem, there was no entry signal so nothing was lost. On to the next trade!
You don´t need to be a weatherman to know which way the wind blows - B. Dylan
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