USD/CAD had a sharp drop followed by a quick retracement yesterday, as the FOMC statement against tapering triggered overall dollar weakness. The pair is currently finding resistance at the 61.8% Fib on the 1-hour time frame.

Stochastic has already reached the overbought region and formed a bearish divergence but it has yet to cross down. The pair could still test the trend line and former support level around the 1.0300 major psychological level before resuming its drop.

Shorting at market with a stop above 1.0300 and a target of the previous lows near 1.0200 would be a good day trade with a reward-to-risk of at least 2:1.

By Kate Curtis from Trader’s Way