I’m sticking with the foreign exchange markets this week as this asset class continues to show attractive position trade scenarios (short euro and yen are both working out nicely).

The Canadian dollar futures contract is pressing technical support at 0.9113 for the fifth consecutive day and intraday price weakness has so far attracted buying. This line in the sand is a 50% retracement of the uptrend from March to July. It acted as resistance in February and support upon three tests in May and June. Tests of 0.9113 earlier this month brought in buyers, and now it appears that this market is close to decision time.

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Big Picture

When I step back and look at the bigger picture, I don’t see any clear indication as to whether the downtrend from the 2012 high is still in place or if the rally off the low this March is the beginning of a new cyclical bull market. Position traders shouldn’t be overly concerned with this right now.

Good Risk/Reward

The more important point is that risk is nicely contained and reward potential is substantial. Note multiple turning points near 0.9400 create chart resistance, and there’s a big air pocket (an absence of resistance) between the current level and there. That compares nicely with a stop loss of a per cent or so beneath 0.9113 support.

ETF Play

If you can’t trade currency futures or options, consider FXC (CurrencyShares Canadian Dollar).

Good trading, everyone.