When I am looking for reversals, I consider many different dynamics in the market. Those may include: cross rate analysis, correlations in asset classes, etc. For today, I am looking specifically at the USD/CAD. Here are the reasons why:

• The CAD has underperformed other commodity currencies such as the AUD and NZD dollars in recent days.
• CAD/JPY is approaching its 200SMA on the daily charts, AUD/CAD is hitting 14 year highs and EUR/CAD has made higher lows on the daily chart showing signs of possible reversal.
• Crude (WTI) Oil (which can be a strong correlation to CAD) has failed to rally past 103 in recent weeks despite the strong equity market rally which may be assisting in CAD weakness.
• USD index is finding support (today) on the 50% Fibonacci level support from October lows to this January’s highs.

If you factor in the above with the charts I am about to show you (step by step) you now may have a counter trend setup:

Many setups I look for daily look similar to this. That doesn’t mean they follow through the way I want. If they start to follow my plan, there are always other considerations that I ask while in the trade like “are equities moving in the appropriate direction? Is the USD index tracking in lockstep? etc” If they do not follow my plan, I simply do not trade and look for the next setup.