The Next 72 Hours Are Big For The USD/CAD

The next three sessions are going to be pivotal for the Loonie. Several market-influencing events are scheduled, each capable of shaking the USD/CAD out of its post-BoC Announcement slumber. So far, it is another sideways forex session for the Loonie, with price consolidating around the 1.2450 level.

Below are the coming events that will influence both the Canadian dollar and USD/CAD:

Event                                            Day

API Crude Oil Stocks                   Tuesday, 4:30 PM EST

EIA Crude Oil Inventories          Wednesday, 10:30 AM EST

Canadian Retail Sales                  Thursday, 8:30 AM EST

WTI crude oil is trading in the vicinity of $65.00. If inventories drive oil prices higher more bearish action in the USD/CAD is likely. Retail Sales are projected to be down, possibly attracting buyers to the market.

USD/CAD Technicals

The daily chart gives us a clear picture of the Loonie’s prevailing market state. Price action is heavily rotational within the session range created by last week’s BoC interest rate decision.

Over last several months, I have referenced the “L” formation repeatedly in reference to bearish markets. The current USD/CAD daily chart is a near perfect illustration of this pattern. A tightening of daily ranges between 1.2500 and 1.2400 defines this market.

Bottom Line: From a tactical perspective, trading rotational markets is straightforward. A strategy of “fading the extremes” may be very effective in capitalizing upon price regressions toward an established value area. This can be accomplished in the USD/CAD market by doing the following:

• Sell resistance from 1.2500 with a stop at 1.2541.
• Buy support at 1.2388 with a stop located at  1.2354.

Each of these trades provides an opportunity to collect over 35 pips on a regression to value at 1.2450 when implementing a 1:1 R/R management plan.