Bearish Correction In The USD/CAD
The next 24 hours in the USD/CAD are going to be big, featuring oil inventories and the U.S. ISM Non-Manufacturing Index release.
The current bear market in WTI crude oil has done nothing to deter CAD backers, at least not this week. As a result, the USD/CAD is trending south, toward the bottom of daily value at 1.3400. If WTI can mount a positive session going into this week’s inventories, we may see a test of May’s low (1.3357).
Pretty much everyone is aware of Canada’s dependence on energy exports. Natural gas and crude oil production account for about 10% of national GDP; when energies are down, the USD/CAD is up. This has not been the case today as forex players are slamming the Greenback.
USD/CAD Breaks Daily Support
The daily chart for the USD/CAD shows the degree of bearish pressure. When rates broke through the 1.3475-1.3450 area, a rapid plunge to 1.3415 ensued. Given the intraday rebound of July WTI crude and the USD’s relative weakness, May’s Low (1.3357) is likely to be tested in the near future.
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Here are the levels to watch in this market for the rest of the day:
- Resistance(1): Bollinger MP, 1.3459
- Resistance(2): Daily SMA, 1.3462
- Support(1): May’s Low, 1.3357
Bottom Line: Until elected, I will have buy orders queued up from 1.3351. With an initial stop at 1.3324, this trade produces 54 pips on a 2:1 risk vs reward scenario.
The next 24 hours are going to be big for the Loonie. Weekly crude oil inventory numbers, the U.S. ISM Non-Manufacturing Index, and Canadian Q1 Labor Productivity are all due for release. With a bit of luck, this trade will go live following today’s API Crude Oil Stocks report.
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