I feel like every time I look at USD/CAD the pair is reversing. The most likely reason I feel this way is because, as I have written before, it is chopping around within the apex of a long-term triangle dating back to early 2016. As a result, the pair is oscillating around the 200-day moving average and can’t seem to drift too far away from it!
Source: Tradingview, City Index
There were two events that caused USD/CAD to go bid today. The first was that crude oil was down over -2.5%. The Canadian Dollar and crude oil generally have a positive correlation. Generally, when crude oil moves lower, so does the Canadian Dollar. In other words, when crude oil goes lower, USD/CAD will move higher. The other event that occurred today was that the Bank of Canada’s Wilkins spoke today and said although Canada’s economy and financial system are in a good place, they still have policy room to maneuver, as well as other options such as forward guidance, if need be. The comments are considered dovish, as the BOC has been on hold and has not mentioned any kind of maneuvering (if it needs to).
Although USD/CAD was up 0.5% today, there is strong resistance above (of course there is, price is in the apex of the triangle!) On a 240-minute chart, price in running into the 78.6% Fibonacci retracement level from the highs on October 10th to the lows on October 29th at 1.3280. There is also horizontal resistance above in the form of prior lows at 1.3290. Just above that is a rising trendline which crosses just below 1.3300. Take note of the higher highs in price and the lower highs in the RSI. Today’s price took out the prior high by 1.5 pips. Because there are 3 higher highs in price and 3 lower highs in the RSI, this is a strong warning from the market that prices may reverse. AND the 200-day moving average is at 1.3275.
Source: Tradingview, City Index
If price does reverse, the rising trendline from the long-term symmetrical triangle crosses near 1.3140. If USD/CAD breaks through the trendline, it could retest prior lows near 1.3027.
Watch crude prices. If they continue to fall, USD/CAD may continue to go bid!
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.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX 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), StoneX Financial 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 StoneX Financial 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 StoneX Financial 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.
StoneX Financial 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.