Kay Van-Petersen
Kay Van-Petersen, macro strategist at Saxo Capital Markets, digests the market action seen in week 43 and gives his tactical positing. Van-Petersen favours a USD step back, sees gold consolidating, and believes that European equities are overheated.
Short term
Trade view / 04 July 2016 at 11:42 GMT

Brexit fallout contaminates EURCAD

FX Consultant / IFXA Ltd

EURCAD has resumed its gentle intraday decline following the Brexit vote and remains bearish while trading below 1.4380. The breach of the 1.4375 area, although ragged and not sustained, points to further downside while the downtrend prevails. 

Oil prices survived the worst of the Brexit volatility with key support at the $45.00 area containing weakness. The prospect of the normalisation of the current supply/demand imbalance will continue to support WTI and by default the Canadian dollar.

The fallout from the Brexit vote is a negative for EURUSD and raises speculation that the European Central Bank could ease again despite numerous opinions that quantitative easing is losing its effectiveness.

This week’s Canadian Trade is expected to be weak due to the effects of the Alberta fires which has also skewed the employment report making it a non factor for USDCAD trading. Meanwhile, US nonfarm payrolls are expected to rebound to 200,000 which will undermine EURUSD.
Management and risk description
This is a risky trade because EURCAD trades in wide ranges (usually) and FX markets are skittish making the stop loss vulnerable on a spike. The stop is also vulnerable to weaker than expected US data or bullish USDCAD reactions to Canadian data.

Trade view parameters

Entry: Sell ½ position of EURCAD at market (currently 1.4310) balance at 1.4370

Stop: 1.4420

Target: 1.4180

Time horizon: 5 days

EURCAD 30-minute with take profit target shown

Source: Saxo Bank. Create your own charts with SaxoTraderGO click here to learn more

EURCAD 4-hour with stop loss noted
Source: Saxo Bank 

EURCAD 5-year daily with moving averages
Source: Saxo Bank

— Edited by Clare MacCarthy

Non-independent investment research disclaimer applies. Read more
04 July
John Roberti John Roberti
Dear Michael,
04 July
John Roberti John Roberti
I am a bit surprised by your view on Oil! EIA published again warning that the US market is not following expectations with increasing gasoline stock and slightly decreasing gasoline consumption while Canada oil production will be getting to full by month end and Nigeria is resuming production after peace settlements with rebels and expecting normal level by month end thus glut is growing while brexit is slightly reducing consumption expectations and hedge fund going back to shorts! I am already surprised that USDCAD is going down now but that should not last tomorrow. Your comments always appreciated
04 July
Michael O'Neill Michael O'Neill
Hi John I really don't think oil is going anywhere. All thr reasons that you pointed out about why oil should be lower are true and valid. They are also reflected in the price. I think the break below 1.2840 suggests further USDCAD weakness while EURUSD below 1.1170 appears bearish. So with luck EURCAD heads lower.
04 July
John Roberti John Roberti
I agree that eurusd could go lower but in that case USD index will go clearly higher and thus USDcad would follow the move, pa? Isnt that right?
04 July
John Roberti John Roberti
particularly if oil would move lower (and 47-46 is not out of the picture with the recent glut situation). Let's see Wednesday with EIA figures


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