Trade view / 31 July 2013 at 13:39 GMT

Bullish US short-term technicals support USDCAD move

FX Trade Strategist / www.Loonieviews.net
Canada
Price target:
Market price:

Trade idea background
The USDCAD spent most of July in a downtrend but failed to break strong US dollar support in the 1.0240-60 area. Canadian data releases have been on the soft side (May GDP +0.2 vs forecast of 0.3 percent) while US data has been mixed to firmer (US Q2 GDP 1.7 percent vs forecast of 1.2 percent). The WTI/USDCAD correlation appears to be back as shown on Chart 1. The break above 1.0310 suggests that a short-term bottom is in place at 1.0255.

Trade management and risk description
This is a short-term range based on bullish US short-term technicals.  It is vulnerable to a) a more dovish-than-expected Federal Open Market Committee outcome today and b) weaker-than-expected US payrolls data tomorrow.

Trade idea parameters

Entry: Buy USDCAD between 1.0315-20

Stop: 1.0235

Target: 1.0440

Time horizon: one week

USDCAD/OIL showing oil lower in channel and USDCAD higher, breaking channel

usdcad oil

Source: Saxo Bank

 

Short term chart – USDCAD Hourly-shows break of downtrend

usdcad hourly

Source: Saxo Bank  

 

USDCAD daily

usdcad daily 31July13

Source: Saxo Bank

 

Five-year chart

USDCAD 5 Yr

Source: Saxo Bank

 

Disclaimer:
Non-independent investment research
This investment research has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Further it is not subject to any prohibition on dealing ahead of the dissemination of investment research. Saxo Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. » Read more

5y
John Shaw John  Shaw
Thank you as always Mike. Much appreciated.

The news this afternoon will also set some action either way and then we have the unemployment numbers tomorrow and then non-farm for Friday. I can't see it breaking 1.044 though but you never know do we.

Have a great day.
5y
Michael O'Neill Michael O'Neill
I don't think this version of the FOMC will be earth shattering. I think the FOMC were surprised at the reaction to the last meeting and since they spent the last 3-4 weeks "clarifying" that they won't do anything at this meeting that would result in a replay. I think all the fun will come from NFP on Friday and I am betting that the number will surprise to the upside which would give USDCAD a healthy boost. Also the move above 1.0310 suggested that a short term bottom was in place, but I will be rather peeved if it goes below 1.0280
5y
John Shaw John  Shaw
All the data globally now is so conflicting and reading in different directions it is really mind numbing. The markets and Currencies are up today on this and down today on that.
But NFP is also good for the CDN too is it not so I wonder just how big the move really is going to be?
5y
Michael O'Neill Michael O'Neill
NFP is good for Canada in the long run. I think that the knee-jerk reaction to a higher than expected print will be to buy USD against everything, including Canada. But, like you said, it is also good for Canada,so USDCAD, will not suffer the same fate as has befallen AUDUSD. I truly think tat we will just bounce around in a 1.0240-1.0440 range for August and I hope that range doesn't' prove to be too wide.
5y
Michael O'Neill Michael O'Neill
NOTE: The crappy initial performance of this trade idea is a text-book example of why one shouldn't read too much into technical signals during periods of poor liquidity ahead of fundamental uncertainty. I still believe that the trade idea is soundhowever the entry level sucked
5y
John Shaw John  Shaw
LMAO
5y
Michael O'Neill Michael O'Neill
knowing you got a laugh, may be the only good thing to come out of this idea . :) time will tell

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