Market News & Analysis

Top Story

Trump's Plans cause WTI and the Canadian Dollar to Reverse

Yesterday, we discussed how the Canadian Dollar could be in trouble if WTI Crude were to make a false breakout of its daily triangle formation. Today, the false breakout was confirmed as Trump said he is making plans to meet with Iranian President Hassan Rouhani at the UN meeting later this month.  A meeting between the two would be the first step towards easing sanctions on Iran and is generally considered to be negative for the price of crude.

The doji candle in WTI Crude on a daily timeframe yesterday was a candle of indecision.  Buyers tried to move price higher, however they were overcome by sellers who pushed the price back down to close unchanged on the day.  Today, sellers continued to dominate and price moved back into the triangle, closing down almost 3.70%

Source:  Tradingview, City Index

USD/CAD was hovering near the 61.8% retracement support level from the July 19th lows to the September 3rd highs, and with the move lower in Crude today, USD/CAD moved aggressively higher (CAD lower). 

Source: Tradingview, City Index

To better illustrate how the two assets move together, below is a chart of WTI Crude and Canadian Dollar Futures.  Futures trade in the same direction as Crude, as opposed to USD/CAD which trades inversely to crude.  The correlation coefficient today is at +.64

Source: Tradingview, City Index

So yesterday we pondered, “What happens tomorrow if Crude reverses its recent move higher and trades lower back into the triangle?  If that happened, the Canadian Dollar may trade lower with it (USD/CAD higher).   On a 240-minute USD/CAD chart, we noted the RSI was diverging with price, which is typically a signal of a potential reversal.  This is indeed what happened as Crude moved lower.  USD/CAD traded to a high of 1.3214 and closed up 45 pips today at 1.3197.  (The RSI is no longer oversold). Resistance levels remain the same as yesterday, horizontal resistance and Fibonacci retracements between 1.3230 and 1.3260.  First support is now horizontal support at 1.3160.  Below that support is near 1.3100.

Source: Tradingview, City Index


Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.

Important Notice:

Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.