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September’s Low In Range For The USD/CAD

Posted Tuesday, October 20, 2020 by
Shain Vernier • 2 min read

After a relatively bullish September, the USD/CAD is resuming its downward trajectory. Early week trade has brought considerable weakness to this pair, with rates falling to 1.3100. No matter which side of the ledger you’re on ― bullish or bearish ― the next 24 hours is going to be pivotal for the Loonie.

Tuesdays and Wednesdays are key times for the USD/CAD. The weekly crude oil inventories reports are released to the public as are other economic numbers. Subsequently, volatility is prone to spike as forex players attempt to decipher the data. For the coming 24 hours, here are the important events facing the USD/CAD:

Event                                                     Projected         Previous

API Crude Oil Stocks                              NA                  -5.42M

EIA Crude Oil Stocks                             -0.240M          -3.818M     

BoC Core CPI (MoM, Sept.)                    0.1%                0.0%    

BoC CPI (MoM, Sept.)                             -0.1%              -0.1%    

Retail Sales (MoM, August)                    1.1%                1.1%

Due to the COVID-19 pandemic, fall 2020 has been a transitional period for crude oil. Supplies have regularly come in negative, bucking seasonal trends. More of the same is expected this week, which will help protect the $40.00 level in WTI futures and USOIL.

On the inflation front, there hasn’t been much going on for the Loonie. Like the Greenback, CPI has struggled to move significantly higher throughout 2020. It will come as no surprise if the BoC’s CPI figures for September lag expectations. For Canadian Retail Sales, no change is expected.

If oil supplies continue to shrink and BoC CPI ticks higher, the USD/CAD will be in line to test September’s low.

September’s Low In View For The USD/CAD

As of this writing, a bearish bias is warranted toward the USD/CAD. Rates are challenging the 1.3100 handle and appear poised to move lower.

USD/CAD, Weekly Chart
USD/CAD, Weekly Chart

Here are the levels to watch for the remainder of the week:

  • Resistance(1): Weekly SMA, 1.3230
  • Support(1): September Low, 1.2994

Bottom Line: If we see the USD/CAD extend its descent, a long trade setup may come into play. Until elected, I’ll have buy orders queued up from 1.3006. With an initial stop loss at 1.2974, this trade produces 25 pips on a slightly-sub 1:1 risk vs reward ratio.

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