USD/CAD Extends Gains, 2017’s High In View

A perfect storm of fundamentals has hit the Loonie this month. Plunging WTI crude oil prices, a U.S. FED rate hike, the G20 signing of USMCA, and lagging Canadian economic metrics have all spelled doom for the CAD. At press time, rates of the USD/CAD are trending north in the neighborhood of 1.3600. Fresh yearly highs are becoming a daily occurrence, with 2017’s high point of 1.3793 quickly approaching.

During the U.S. pre-market hours, Statistics Canada released their Retail Sales (MoM, October) report to the public. Both Retail Sales (0.3%) and Retail Sales Except Autos (0.0%) came in beneath consensus expectations. These reports have not been well received by the forex, as illustrated by the CAD losing ground vs the Greenback.

USD/CAD Technicals

Since the public signing of USMCA at the G20 by the U.S., Mexico, and Canada, the bull run has been on in the USD/CAD. Aside from a significant retracement on December 7, it has been up, up, and away.

Until the end of the year, here are three topside levels to watch for this market:

• Resistance(1): Psyche Level, 1.3600
• Resistance(2): Psyche Level, 1.3700
• Resistance(3): 2017’s High, 1.3793

Bottom Line: In the face of such a strong uptrend, I have little interest in shorting this market using only a psyche level as topside resistance. However, in the event we see 2017’s high challenged, selling may be a good opportunity.

For the remainder of the year, I will have sell orders queued up beneath 2017’s high at 1.3774. Using an initial stop at 1.3826, this short-term position trade yields 50 pips on a sub-1:1 risk vs reward management plan.