Squeezing blood from a stone in USDCAD
The mix of higher China oil imports, crude stocks drawdowns and supply disruptions from Nigeria have given WTI a huge boost and the Loonie is along for the ride. USDCAD has also been undermined by the diminished rate hike expectations for June and July.
The intraday USDCAD technicals are bearish following the break of support at 1.2900 and 1.2735. USDCAD is sitting just above the key 1.2660 support level and if it breaks it is a one-way ticket to the May low.
The Bank of Canada is firmly in neutral which diminishes the impact of domestic data. Friday’s employment data will be incomplete due to the Alberta wildfires and therefore a non-factor for traders.
The USDCAD decline has been steep but the door is wide open for further losses.
Management and risk description
This is a risky trade and not for the faint of heart. It appears that most of the “easy” money has been made and we are attempting to squeeze blood from a stone. This trade is also a WTI trade. If oil rises it should work. If oil declines it won’t. The trade is vulnerable to improving US rate hike sentiment which would boost the US dollar versus the majors and likely trigger the stop.
Entry: Sell USDCAD at market 1.2658
Time horizon: 5 days
Chart USDCAD 1 hour showing break of key support
— Edited by Clare MacCarthy
Non-independent investment research disclaimer applies. Read more