Wednesday marks the first trading day of July and the beginning of peak-demand season for WTI crude oil. Prices are reflecting this seasonal trend, with August WTI rallying toward $40.00 per barrel. Forex traders have largely ignored oil’s strength today, choosing to pass up going long the USD/CAD. For the time being, it looks like sentiment toward the Loonie is neutral going into July.

The period of late-June and early-July is typically a quiet one on the financial markets. Many liquidity providers are out of the office on holiday. While anything is possible from a volatility standpoint, the doldrums of summer often bring limited trading ranges and choppy price action. For the USD/CAD, this is exactly what we are currently seeing.

USD/CAD Remains Range Bound

During the pre-market hours, Statistics Canada released several economic metrics to the public. All in all, the numbers were fairly solid, suggesting that a post-COVID-19 recovery is underway. The headliner of the group was a 35.6% month-over-month jump in Building Permits (MoM, May). This figure represented the largest single-month gain since March 2009.

Bottom Line: Sooner or later, the USD/CAD will break out of its tight range. If the move is bullish, then shorting the Weekly SMA (1.3853) isn’t a bad way to play the action. Should we see WTI crude futures rally hard above $40.00 in the near future, this trade is likely to come into play.

Until the Friday close, I’ll have sell orders in the queue from 1.3844. With an initial stop loss at 1.3877, this trade produces 30 pips on a slightly sub-1:1 risk vs reward ratio.