Strength In Commodities-Another Look At The USD/CAD

Posted Wednesday, January 3, 2018 by
Shain Vernier • 2 min read

Commodity prices are the leading story for the fledgling 2018 financial year. Rallies in gold and WTI crude have surprised many long-term equities investors, given the strength of the U.S. indices. Typically, as equities rally, the value of commodity derivatives stagnate. For the last six weeks, this has not been the case.

As the Dow Jones Industrial Average (DJIA) approaches the key level of 25,000 we are observing strong performance in the leading commodity dollars. Both the Australian and Canadian offerings are posting consistent gains against the USD.

Is there a coming correction in gold and oil pricing? Only time will tell, but right now buyers are coming to the marketplace in droves.

USD/CAD Technicals

In a Tuesday update, several downside macro support levels were defined as being potentially relevant. Thus far, the 50% retracement of the September/December extremes has proven valid.

USD/CAD, Daily Chart

Today’s action in the Loonie is unusual given the normal correlation to crude oil.  February WTI futures have broken out to the bull posting an intrasession gain of nearly one dollar. The USD/CAD has not followed suit, with the USD gaining on the Canadian dollar in the early U.S. session.

Price is far below topside resistance, so for the time being let’s focus on areas of support:

  • Support(1): Key psyche level, 1.2500
  • Support(2): 50% retracement Sept. Low/Dec. High, 1.2490
  • Support(3): 62% retracement Sept. Low/Dec. High, 1.2388

Overview: Today’s session is going to act as the catalyst for late-week trade setups. If we get a green candlestick on the close, a retracement sell will be in the cards for tomorrow or Friday’s session. In the event that the Loonie comes off ahead of the close, downside support levels will be primed for long entry.

In the meantime, check out the signals page for trade setups facing a wide variety of asset classes. Trade ideas facing commodities, indices, currencies, and cryptocurrencies stand ready to make your day a profitable one.

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