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Trade Setup For The Day: Long USD/CAD (March 6, 2013)

USD/CAD has been moving sideways lately as it topped at the 1.0300 resistance area. The pair has also found support just above the 1.0200 handle and seems ready to test the bottom of the range today.

The BOC is scheduled to make its interest rate statement during the U.S. session and is likely to keep rates unchanged. Note, however, that BOC Governor Mark Carney withdrew some of his usual hawkish remarks during the previous BOC monetary policy decision, and this caused a huge Loonie selloff. Since then, Canada still printed weaker than expected economic figures, which could prompt Carney to be much less hawkish again.

The Canadian Ivey PMI is also set for release later on and the report could show a slowdown in manufacturing activity for February. The index is expected to dip from 58.9 to 56.2 during the month, which could weigh on the Loonie. A weaker than expected reading could trigger a sharp selloff for the Canadian dollar.

Stochastic has already reached the oversold region on the 1-hour time frame, suggesting a potential bounce for USD/CAD. A long trade around 1.0225 support with a stop below 1.0200 (1.0175) and a profit target at 1.0300 would be a 1.5-to-1 reward-to-risk ratio.

By Kate Curtis from Trader's Way