Trade idea: USDCAD Sellers Could Benefit from Stronger Oil and Dovish Fed
The USDCAD sold off remarkably following yesterday’s interest rate decision by the Bank of Canada, the jump in crude oil prices and the negative response of the US Dollar to Fed Chairman Powell’s testimony. With one central bank holding rates and another indicating that there will be a rate cut, a perfect divergence was setup for the USDCAD with the pair hitting the daily support of 1.30382. The pair is presently trading at just below 1.30776 as at the time of writing.
Crude oil prices also rose to above $60.50 as a result of a greater than expected shortfall in US crude oil inventories. These fundamental plays may affect the USDCAD well into the next week.
Technically speaking, the key short term support and resistance levels on the USDCAD are 1.30370 and 1.31470 respectively. The hourly chart shows an intraday resistance that exists at 1.3080 to 1.3090. If the support price of 1.30370 is breached to the downside, the door will be open for the USDCAD to target multiple support levels that exist between 1.29240 and 1.3000.
With the sentiment for USDCAD presently bearish, sellers would look to short the USDCAD at present price levels.
An aggressive short entry would be at 1.3090 with a stop loss of 1.3125, and a profit target of 1.3000.
A more conservative short entry position would allow price to get to the resistance level of 1.31470 and short at that point if the resistance is not broken. Stop loss would be at 1.3207, with a profit target of 1.29240.