USDCAD retreated – it's time to reload
USDCAD touched levels it had not seen since 2004 on Friday but a failure to close above major resistance at 1.3065 combined with another Chinese equity meltdown today led to a steep, profit-taking retreat. It’s time to reload.
The Canadian fundamentals are weak. WTI oil prices are under pressure threatening further losses back to the 2015 low. The US dollar selloff versus the majors on Monday may be reversed by Wednesday’s Federal Open Market Committee meeting. A negative print for Canadian GDP on Friday combined with the prospect of USDCAD buying for month end portfolio rebalancing suggests further USDCAD gains.
The short-term USDCAD technicals are bullish looking for another test and break of Friday’s 1.3103 high to extend gains toward 1.3400.
Management and risk description
A rally in WTI oil prices back above $50-52/bbl would likely trigger the stop. In addition, if Wednesday’s FOMC statement is dovish which reduces the odds for a September rate hike, the stop would be triggered.
Trade idea parameters
Entry: Buy ½ position of USDCAD at market (currently 1.3020) and balance at 1.2990.
Time horizon: Friday, by end of day
Chart: USDCAD hourly with post rate cut support level shown
Chart: USDCAD Daily showing July uptrend
Chart: USDCAD 5 year weekly with moving averages and Fibonacci levels