USD/CAD is an obvious sell...Right?? Longer term outlook
First, my preferred time frame is NOT the weekly, as it takes a great deal of patience to stick with your trade plan. However, I deem it important to understand the larger picture for this pair.
The bears have been on a tear this month and I expect that to continue, albeit temporarily. DO NOT lose sight of the bigger picture, this pair is still clearly on a monthly/weekly uptrend.
Following three continuous weeks of rejection @ the 1.3350 zone (lower red), the highest probability move from the current price level is down. Once (if) price reaches the 1.228 demand zone (green), I expect a strong move up. However, if this level is clearly broken AND smashes through previous resistance levels (purple lines), this could signal a major trend reversal and monster move down.
Keep in mind this a weekly chart ( I know, zzzzz) and may take 1-2 years to manifest.
We have a busy week ahead for the USD on the fundamental front which leads me to an alternative third scenario - a sharp move up from current price levels on better than expected USD news. Although unlikely, it is still a real possibility. Powell's speech will be key here, as I believe dovish sentiment is already priced in.
The Loonie has an uneventful week on the news front but a monthly GDP report on Thursday can provide some volatility and insight.
One more thing, much has been made about oil's negative correlation with this pair. Now, I heed caution at putting too much weight on correlation but since September, the two pairs have been closely correlated negatively. WTI futures is on the cusp of breaking a major level with huge potential upside.
In summary, the most likely move is down from current price levels. Therefore, I am bearish short-term. When and if price approaches the green demand zone, I expect a sizable move up in accordance with the longer term trend. If price breaches the green demand zone with conviction, be on the lookout for more downward pressure.
The bears have been on a tear this month and I expect that to continue, albeit temporarily. DO NOT lose sight of the bigger picture, this pair is still clearly on a monthly/weekly uptrend.
Following three continuous weeks of rejection @ the 1.3350 zone (lower red), the highest probability move from the current price level is down. Once (if) price reaches the 1.228 demand zone (green), I expect a strong move up. However, if this level is clearly broken AND smashes through previous resistance levels (purple lines), this could signal a major trend reversal and monster move down.
Keep in mind this a weekly chart ( I know, zzzzz) and may take 1-2 years to manifest.
We have a busy week ahead for the USD on the fundamental front which leads me to an alternative third scenario - a sharp move up from current price levels on better than expected USD news. Although unlikely, it is still a real possibility. Powell's speech will be key here, as I believe dovish sentiment is already priced in.
The Loonie has an uneventful week on the news front but a monthly GDP report on Thursday can provide some volatility and insight.
One more thing, much has been made about oil's negative correlation with this pair. Now, I heed caution at putting too much weight on correlation but since September, the two pairs have been closely correlated negatively. WTI futures is on the cusp of breaking a major level with huge potential upside.
In summary, the most likely move is down from current price levels. Therefore, I am bearish short-term. When and if price approaches the green demand zone, I expect a sizable move up in accordance with the longer term trend. If price breaches the green demand zone with conviction, be on the lookout for more downward pressure.
Comment:
USD/CAD bears continued there run as the weekly finishes nearly down 1%. Meanwhile, USOIL continues its recent surge eyeing a clear break above the $56 zone. At this point, my projections remain unchanged.