Aside from the COVID-19 contagion, the May rally of WTI crude oil is quickly becoming the financial story of the spring. Prices of July WTI futures have rallied from $6.50 per barrel to above $33.00 ― a gain of more than 400%. Subsequently, the bullish action in crude has been good for the Loonie and the USD/CAD is driving beneath the 1.3800 handle.

For the second day in a row, BoC Governor Stephen Poloz is scheduled to issue public comments later today. On Monday, Poloz addressed the University of Alberta via weblink. Here were a few of the key quotes:

• “Inflation may climb back to the 2% goal more slowly than on average.”
• “We [the BoC] could let inflation rise more slowly or quickly than on average.”
• “Out policy framework gives us flexibility in the time it takes to get inflation back to target.”

In addition to the inflation talk, Poloz suggested that more stimulus is an ideal way of boosting economic recovery. As we move forward, it will be interesting to monitor the stances that various governments take toward further COVID-19 stimulus packages. Recovery spending has been astronomical; one would think that further commitments are likely to be met with increasing resistance.

Let’s take a closer look at the USD/CAD and today’s bearish breakout.

USD/CAD Breaks Beneath Triple Bottom

On the back of stronger crude oil pricing, the USD/CAD has shattered previous support. Rates have plunged beneath a daily Triple Bottom pattern; now, values are positioned to fall further.

Here are the key support levels to watch this week in the Loonie:

• Support(1): Bollinger MP, 1.3614
• Support(2): 62% Fibonacci Retracement, 1.3607

Bottom Line: In a Live Market Update from last Friday, I outlined the importance of the daily Triple Bottom (1.3855-50) pattern. Since then, this level has been taken out and bears are dominating the action.

Until elected, I will have buy orders in the queue from 1.3616. With an initial stop loss at 1.3574, this trade produces 40 pips on a near-1:1 risk vs reward ratio.