USDCAD has bounced between 1.2900 and 1.3120 since the first Brexit results were announced. Oil prices have alternated between providing support or undermining the Canadian dollar on a constantly shifting general US dollar.
The intraday USDCAD technicals are bullish while trading above 1.2970 supported by short-term technicals that are bullish above 1.2810 from the May low.
There are rumors that the large drop in US equities in June will lead to US dollar buying versus the Canadian dollar which if so, will provide further incentive for a move higher.
Canadian GDP data for April are due this morning (forecasted 0.1% versus previous minus 0.2%). A worse than expected number would be USDCAD-positive. A better than expected number may have minimal impact as it won’t reflect the negative from the Alberta wildfires.
The 38.2% Fibonacci retracement level of the January-June range is a juicy target and comes into play at 1.3309.
The Istanbul airport attack and the uncertainty from Brexit should keep the focus on risk aversion especially as the US heads into a long weekend.
Management and risk description
This is a risky trade as USDCAD direction continues to be at the whim of global forces and oil prices. The technical rationale for this trade is sketchy as USDCAD has struggled to break above the 100-day moving average (1.3065). The stop will be triggered on a far-better-than-expected Canadian GDP print which lead to a spike lower in USDCAD.
In addition, there is a lot of time between now and the possible month end fixing demand for USDCAD. That means, possible USDCAD demand for the fix to start from much lower levels.
Entry: Buy 1/3 position of USDCAD call at market (currently 1.2988), 1/3 at 1.2945 and 1/3 at 1.2910.
Time horizon: five days.
USDCAD 30-minute buy levels and stop-loss shown:
Source: Saxo Bank
USDCAD four-hour with Fibonacci retracement noted:
USDCAD five-year daily with moving averages:
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Source: Saxo Bank
— Edited by Michael McKenna
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