Short term
Trade view / 04 August 2016 at 13:09 GMT

USDCAD may have more upside

FX Consultant / IFXA Ltd
Canada
Instrument: USDCAD
Price target:
Market price:
Background 

USDCAD is likely heading back higher due to a combination of bullish short term technicals, bearish oil price sentiment and a rejuvenated US dollar do to rate hike and risk aversion concerns.

The intraday and short term technicals are bullish, supported by uptrend lines that come into play at 1.3030 and 1.2840, respectively. Support is further reinforced by the 55 day moving average at 1.2982 and the 100 day moving average at 1.2944.

The downtrend for the past few days ended with the move above 1.3070 on Thursday. Since then the price action has been consolidative above the uptrend line at 1.3040. In addition, the 1.3000-1.3260 trading band has contained moves since July 19.

Falling oil prices have been a key driver of USDCAD strength and WTI remains in a downtrend while trading below $43.00/b. The US dollar caught a bit of a bid following the ADP employment data and a strong US nonfarm payrolls report on Friday would lead to USDCAD gains.

Management and risk description 

This trade is vulnerable to a weaker than expected US employment report and stronger than expected Canadian employment data, both do Friday. It is also vulnerable to a rebound in WTI prices. 

Trade idea parameters
Buy: ½ USDCAD at market (currently 1.3055) balance at 1.3010
Stop: 1.2970
Target: 1.3150
Time horizon: 3 days

USDCAD 15 minute with uptrend and consolidation zone noted (click to enlarge)
usdcad
 Source: Saxo Bank 

USDCAD 4 hour with stop loss noted (click to enlarge)
usdcad
Source: Saxo Bank 

USDCAD 5year daily with moving averages (click to enlarge)
usdcad
 Source: Saxo Bank

— Edited by Clemens Bomsdorf

Non-independent investment research disclaimer applies. Read more
05 August
Michael O'Neill Michael O'Neill
UPDATE: The second buy order has been filled. The average rate on this trade is 1.30325. Close the position at the market (1.3027) and book a small .006 point loss.

The proximity of the spot rate to the stop ahead of the Canadian and US employment reports turned this trade into a roll of the dice.
05 August
fxtime fxtime
Wow quite some movement on the usdcad...we've moved from the -'ve 2nd std dev and if we hit 1.3181 we will have reached +'ve 2nd std dev value !!
05 August
John Roberti John Roberti
Dear Miachael
05 August
John Roberti John Roberti
I was reasonably convinced on the basis or recent data that the employment report would be good for us and, also, based on recent data the figures for Canada would be poor thus I did not close the trade and thanks to your analysis, I made now 1000 usd on this trade! Thanks a lot for your insight
05 August
Michael O'Neill Michael O'Neill
I'm glad you made out well, John. As for the Canadian employment data, last August the report was recalled because Stats Can screwed up. Deja vu?
05 August
Michael O'Neill Michael O'Neill
Nice call FXTIME
05 August
fxtime fxtime
I was lucky :-)
Hope you are staying cool over there though?
05 August
Michael O'Neill Michael O'Neill
I'm trying. Sipping a cold beer at 10:00 am is probably politically incorrect and possibly a sign of other issues. However, its Coor's lite, which by most standards isn't even beer. :)
05 August
fxtime fxtime
LOL ...The heat wave you have at present would make me trade from inside the fridge LOL.

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