For the USD/CAD, it’s all about FED rates cuts and market fallout. Earlier, the U.S. Federal Reserve (FED), decided to slash the Federal Funds Target Rate by ½ point. This action was historically aggressive, with few precedents. In fact, the last such move took place in 2008 amid the global financial crisis. At this point, one has to wonder if we are on the brink of another.

The coronavirus continues to dominate headlines, with the first U.S.-based fatalities being reported in Washington State. Although the developments came as little surprise, the outbreak continues to rattle the markets. So, the FED did the only thing that it knows how to do ― cut rates and hope for the best. Thus far, the markets are skeptical that further quantitative easing is the right answer.

On the commodity front, prices are on the uptick. Both GOLD and WTI crude oil are rallying, with bullion posing a 3 percent intraday gain. Unfortunately for the Loonie, the boost to crude oil hasn’t translated into a sell-off in the USD/CAD.

USD/CAD Rallies Following Rate Cut

Last Friday brought us a daily Doji formation in the USD/CAD. Since that time, we have seen heavy volatility and prices rotate around the 1.3350 level. 

Here are two support levels to keep an eye on going into this week’s crude oil inventory cycle:

• Support(1): Daily SMA, 1.3294
• Support(2): Bollinger MP, 1.3283

Bottom Line: In the event we see crude oil make a run at $50.00, a buying opportunity may set up in the USD/CAD. Until tomorrow’s EIA report, I will have buy orders in the queue from 1.3304. With an initial stop at 1.3274, this trade produces 25 pips on a sub-1:1 risk vs reward strategy.