Central banks, trade wars, and oil prices typically drive valuations of the USD/CAD. The first two weeks of 2019 have brought plenty of each, featuring activity in the FED and Bank of Canada (BoC), volatile oil pricing, as well as questions regarding eventual ratification of USMCA. From a purely fundamental standpoint, there has been a flurry of action surrounding the Loonie and Greenback.

Subsequently, a major 400 pip sell-off in the USD/CAD has developed. Currency players rejected 2018’s December highs immediately upon the 2 January forex open. For the time being, we are witnessing a significant correction in the USD/CAD.

USD/CAD Technicals

On the daily chart, the USD/CAD is attempting to close in the green for the third straight day. However, while positive, session ranges have been small. Topside resistance levels remain on the distant horizon, suggesting that bearish sentiment is still very much in control of this market.

For the near future, there are the two primary levels on my radar:

• Resistance(1): 38% Current Wave Retracement, 1.3366
• Support(1): December’s Low, 1.3159

Bottom Line: A few minutes ago, the U.S. Treasuries auctions were held. Yields of both the 3 and 6-Month T-Bills fell from previous levels. The 3-Month T-Bill came in at 2.405% and the 6-Month T-Bill settled at 2.460%. Falling debt pricing suggests that the market is anticipating a dovish FED for the immediate future.

As long as the current Swing Low (1.3267) remains the lower extreme in the USD/CAD, I will have sells queued up from beneath the 38% Current Wave Retracement at 1.3364. With an initial stop at 1.3402, this trade produces 35 pips on a slightly sub 1:1 risk vs reward management plan.