- The loonie (CAD) is strongly correlated with the price of oil
- Recent poor labour market data has not changed the BoC's approach
- USDCAD is near key long-term support
Recommendation:
Trade: short USDCAD for the market
- Take Profit 1: 1.19
- Take Profit 2: 1.15
- Stop loss : 1.2650
Justification:
The trend on USDCAD is clearly downward since March 2020. In a little over a year, the pair has fallen to a 3.5 year low near the 2015 lows. After a possible breakout, the pair may hit an area where it hasn't looked since the oil market plunge in 2014. It is a known fact that the correlation between oil prices and CAD is significant. On the other hand, we live in times of elevated inflation, or at least elevated inflation expectations, a factor that plays into the hands of commodities. At the same time, the post-Covid-19 economic recovery is supporting export economies. From a technical perspective, the pair is testing the neckline of a massive double top formation.
Source: xStation5
Trade closed: stop reached:
Stop loss : 1.2650