Short term
Trade view / 23 December 2015 at 12:42 GMT

Opportunity knocks for Loonie bears

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

USDCAD is far to close to significant and psychological resistance at 1.4000 not to decisively break above that level soon and what better time to try than in a holiday-thinned Christmas market?

And what better catalyst than weak Canadian economic data?  October GDP data, (Forecast 0.3%) due today, is expected to reflect a rebound from the ugly -0.5% number posted in September which occurred in part due to disruption at an oil sands facility.  Another weak or negative print should send USDCAD soaring.  At the same time retail sales are expected to show a gain of 0.5%, ex-autos 0.4%.  A weaker than expected result would also keep USDCAD bid.

Better than expected US data (GDP, PCE and the Michigan Consumer Sentiment index should all provide support for the US dollar.

USDCAD has bounced off of resistance in the 1.3990-1.4000 area and is now probing support in the 1.3900-10 area. The intraday uptrend from November 30 remains intact while trading above 1.3900 while the short term uptrend from October 15 is in place above 1.3450. 

Management and risk description

This is a risky trade because, as a rule, intraday technicals are usually meaningless in holiday markets. The idea is predicated on weak data and thin markets leading to a higher USDCAD.  If the data is stronger than expected USDCAD could retreat and trigger the stop.

The steep rally in USDCAD since the beginning of the month means that there is a lot of room for a downside correction within the uptrend.

Today’s EIA Crude Oil Stocks change report is another wild card.  If it shows a large drawn down, oil prices may rally and the USDCAD stop would get triggered.

Trade idea parameters

:  Buy ½ position of USDCAD at market (Currently 1.3905) balance at 1.3860

Stop: 1.3630

Target: 1.4020

Time horizon:
30 December, 2015

Chart USDCAD 1 hour with stop loss and uptrend and support noted
 Source: Saxo Bank

Chart USDCAD 4 hour with take profit level shown
 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


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