USD/CAD Reverses Course
Shain Vernier • 1 min read
Today has brought more whipsaw action to the USD/CAD, driven by a timely news headline and weakness in the WTI crude oil market. At the mid-session point, 1.3200 was on the immediate horizon amid sustained and bearish price action. Now, rates have reversed 50 pips higher. What happened?
The driver of this reversal is a Bloomberg report that the White House is thinking of placing restrictions on investments in Chinese corporate listings. This is a huge deal, in that the new restrictions would impact billions of U.S. dollars currently flowing into Chinese equities. The potential fallout is tough to measure, but has prompted a swift sell-off in the U.S. indices and a rally in the USD.
On the commodity front, WTI is showing modest weakness, sliding about 0.60% to just north of $56.00. This isn’t a huge market driver, but is certainly factoring into trade of the USD/CAD.
USD/CAD: Technical Outlook
The intraday downtrend is long gone for the USD/CAD, with rates rebounding mightily during the mid-session. Once again, any bit of trade war news out of the White House is being actively priced by investors.
Here are the levels to watch for the remainder of the session:
- Resistance(1): Bollinger MP, 1.3254
- Support(1): Daily SMA, 1.3249
- Support(2): Current Wave 62% Retracement, 1.3201
Bottom Line: At press time (12:45 PM EST), it looks like the USD/CAD are poised to close above the 1.3250 level. In the event we see rates slide toward 1.3225, a long trade may set up for early next week.
As long as the Swing High (1.3310, not pictured) remains valid, I will be buying at 1.3209. With an initial stop loss at 1.3179, this trade produces 30 pips on a standard 1:1 risk vs reward ratio.