Kay Van-Petersen
Kay Van-Petersen, macro strategist at Saxo Capital Markets, digests the market action seen in week 43 and gives his tactical positing. Van-Petersen favours a USD step back, sees gold consolidating, and believes that European equities are overheated.
Short term
Trade view / 28 September 2016 at 13:04 GMT

USDCAD prepares for ascent to the summit

FX Consultant / IFXA Ltd

USDCAD bulls have been chipping away at resistance for the past month. First 1.3210-15 gave way after a number of attempts. That was followed by the break of even stronger resistance at 1.3250. Next came the move above the 200-day moving average on Wednesday. The only resistance left is 1.3310, the 38.2% Fibonacci retracement level of the 2016 range.

The Bank of Canada governor may have subtly taken a shot at the Canadian dollar in the Q&A session following his speech when he alluded to a 5-year recovery period for Canada recuperate from the oil market collapse.The BoC wouldn’t be averse to a weaker currency to help jump start non-energy exports.

USDCAD tends to drift higher in Q4 due to numerous factors with profit repatriation by foreign owners of Canadian subsidiaries being a major influence.

Opec, the EIA and the IEA have all downgraded 2016 oil demand while suggesting production levels will remain at current levels. The Algiers meeting may only result in a deal to continue talking about reaching a deal at a future date. If so, oil prices will remain soft.

The USDCAD technicals are bullish. The uptrend from the September 5 low remains intact while prices are above 1.3060, a level which is guarded by an intraday uptrend line at 1.3190.

Management and risk description

This trade is risky as it is advocating getting long USDCAD near the highs of the past five months. This trade needs a bit of management as well. If USDCAD gets near the 1.3290-1.3310 area, it makes sense to sell ½ the position and raise the stop loss to the original entry level, guaranteeing a tidy profit on ½ the position.

If USDCAD breaks decisively above 1.3310 level (38.2% Fibonacci retracement of 2016 range, the ½ position that was sold should be repurchased for 1.3415.

The trade would be stopped out if Canada GDP data on Friday surprises to the upside. It would also get stopped out on a WTI rally above $48.50.


Buy USDCAD at market (currently 1.3205) Sell ½ at 1.3305 and re-buy on break above 1.3325

Stop: 1.3134

Target: 1.3415

Time horizon: 3 weeks

Chart USDCAD 30-minute with uptrends and stop loss shown
Source: Saxo Bank 

Chart: USDCAD daily with take profit and then repurchase levels shown
Source: Saxo Bank  

Chart: USDCAD daily 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
28 September
Michael O'Neill Michael O'Neill
UPDATE: Wow, didn't see that coming! I fully expected that their wouldn't be any news of an agreement prior to the main Opec meeting in November This idea found an fissure in its ascent and has crashed and burned resulting in a loss of 0.0075 points.
28 September
Estuardorlemus Estuardorlemus
Thanks Mike


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