These days, there is a lot going on in the USD/CAD. Shifting central bank policies, active WTI crude oil pricing, and the battle over USMCA ratification are three issues that have been impacting the Loonie. The doldrums of early-April are certainly over and the USD/CAD is now open for business.

Wednesday’s dovish commentary from Bank of Canada (BoC) Chairman Poloz sent the Canadian dollar reeling. Traders piled into the long side of the USD/CAD instantly, doubling weekly gains. The final result was a test above 1.3500, a level not seen since January. At this point, 2019’s high of 1.3662 is coming into view.

USD/CAD Rallies, 1.3500 Is Key

Perhaps the most fascinating observation from the USD/CAD daily chart is the pending Daily SMA/Bollinger MP crossover. This will be the third of April, an extremely high volume of the indicator and a signal of choppy market structure. However, this particular crossover suggests that the current bullish action is becoming exhausted.

Here are the levels to watch until week’s end:

• Resistance(1): Key Number, 1.3500
• Support(1): 38% Current Wave, 1.3426

Bottom Line: It is tricky fading a strong trend and should always be done with caution. Given a tightening WTI crude market, and pending U.S. GDP release, taking a late-week long may be the best short-term play on the board for the USD/CAD. Of course, we need a decent retracement to occur first.

As long as the Swing High (1.3520) remains intact, buys from just above the 38% Current Wave retracement at 1.3431 aren’t a bad way to play this market. With an initial stop loss at 1.3394, this trade yields 30 pips on a slightly-sub 1:1 risk vs reward management plan.