Year-end upside for Loonie?
USDCAD has been far closer to the top of the range than the bottom over the past two weeks and the top is also not only the high for 2014 but also at a level not seen since 2009. Oil prices appear to have stabilised (at least in the short term) around $55.00/bbl, which should alleviate some of the downward pressure on the Canadian dollar. The potential for Canadian dollar demand stemming from year-end portfolio rebalancing flows with the proximity to strong resistance provides a reasonable risk profile.
Management and risk description
This trade is risky. It is vulnerable to USDCAD demand in thin markets that could trigger the stop. The “fixing flows could be minimal or even worse, lead to Canadian dollar selling. Another drop in oil prices would also trigger the stop.
Entry: Sell USDCAD at market (Currently 1.1625).
Time horizon: 2 days (Close after the London Fix (14:00GMT).
Chart: USDCAD 1-hour with 2 week trading range noted
Chart: USDCAD 4-hour with take profit and stop loss areas highlighted
Chart: USDCAD 5-year daily with moving averages
-- Edited by Kevin McIndoe