Short term
Trade view / 16 June 2016 at 12:33 GMT

Oil decline and Brexit issues bashing loonie

FX Trade Strategist /
Instrument: USDCAD
Price target:
Market price:

USDCAD was 1.2750 by mid-morning on Monday and just flirted with 1.3035 on a combination of falling oil prices and risk aversion from the looming Brexit vote in the UK. Tomorrow’s Canada CPI data should have little to no impact on FX markets due to the Brexit vote and the fact that the Bank of Canada is more concerned with the impact of the Alberta wildfires on the economy.  The bank is on hold for the next few months.

The intraday and short term technicals are bullish while trading above 1.2940, supported by this morning’s break above the 1.3020 area and are targeting a retest of the May 2016 peak. The move through 1.2980 which represented the 61% Fibonacci retracement fo the May-June range suggests that a 100% retracement is in order.

WTI oil prices have broken below the uptrend line from the February low at $48.05 which points to further losses toward the $45.00 area.

The mix of Brexit fears and falling oil prices should boost USDCAD and lead to a test of the 200-day moving average

Management and risk description

This is a risky trade as the USDCAD rally from the June low is well underway and vulnerable to a weekend profit taking selloff. The trade is vulnerable to a rally in oil prices or a new bout of “risk seeking” sentiment, perhaps from a fresh Brexit poll with the "Stay" camp  holding a decisive lead.


Entry: Buy ½ position of USDCAD at market (Currently 1.3005)  Balance at 1.2955

Stop: 1.2930 offered

Target: 1.3150

Time horizon: 3 days

Chart USDCAD 30 minute with second buy level noted
 Source: Saxo Bank

Chart USDCAD 4 hour with Fibonacci retracement levels
Source: Saxo Bank

Chart: USDCAD 5 year daily with moving averages

 Source: Saxo Bank

— Edited by Clare MacCarthy

Non-independent investment research disclaimer applies. Read more
John Roberti John Roberti
dear Mike,
John Roberti John Roberti
Thank you for your complete and precise answers to my questions! Let's hope now for the best.I am with you on this one. We should be without contrarian data on oil for the rest of the week...
John Roberti John Roberti
dear vMike,
John Roberti John Roberti
amazing! wti reached its next target at 46,24 (drop of one dollar in this afternoon) and the usdcad did not move since it made a yoyo move from 1,3020 top 1,3067 and back! By the way, I am in usdcad long from 1,2790 and loading as it moves up but with tight stop
John Roberti John Roberti
and it is now really coming down...?
andywielkiszu andywielkiszu
crazy martket. more words
Michael O'Neill Michael O'Neill
Grrrrrrr!. Talk about bad luck. WTI is in a free-fall and hits 45.91-and USDCAD sinks? What a lousy time for the relationship to take a time out.

This trade idea got stopped out when the US dollar gave back all of its gains in the previous 24 hours. Was it due to a change in Brexit Risk sentiment? DID FX markets get overly bullish US dollars? You be the judge.

A correction in USDCAD was expected but the speed of the drop while WTI was declining was not.

This Trade was stopped out (at 1.2926) for a loss of .0056 points


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