USD/CAD – DOWNSIDE TREND CONTINUES

Good day and welcome to an update on USDCAD. We’ll start by taking a look at the higher time frames to get a bird’s-eye view of price action to see where exactly the fundamentals have been driving price over the last few months. With USDCAD and USOIL having such a close correlation due to Canada being one of the biggest oil reserves in the world, the latest news regarding oil has had a huge impact on this pair.

MONTHLY TIME FRAME

Starting on the monthly time frame, looking at how price came up to test the highs of 2016 but ultimately fell short, shows that we are currently in a bearish market. There was a lot of indecision during the month of April as price came up and wicked 1.43000 but managed to close just below the resistance formed at the psychological round number of 1.4000. With OPEC and OPEC+ members beginning talks of cutting oil production in April as well as Canada closing down some of their own oil facilities, it is clear as to why we had indecision in the market during that time, there was uncertainty of whether the proposed production cuts would be followed strictly and also whether the low supply would have the desired effect of boosting the oil economy. The cuts began as of May 1st, and once the oil market began to recover, so did USDCAD. During the month of May, the resistance formed at 1.4000 was confirmed as we broke out above that price, came up to test the highs for a third time and again managed to close bearish for the second consecutive month in a row. With Canada being one of the many OPEC countries to swiftly cut oil production as of May 1st, the slight recovery seen in the oil market during the month of May correlates nicely with this pair.

WEEKLY TIME FRAME

Now let’s take it down a time frame and look at the weekly chart. We can see that since the start of this month which we are only one week into, we have a had huge amount of bearish pressure where price managed to completely break through 1.37000 and close just above the next major support at 1.34000. A video conference was held by OPEC leaders on June 6, where it was agreed that production cuts will be extended until the end of July and possibly further. Countries who failed to comply with the necessary production cuts have promised to cut production further as well as make up for the extra oil that they have been pumping during last month.

DAILY TIME FRAME

On the daily time frame we can clearly see how price consolidated from the end of March up until the end of May between 1.43000 and 1.38500. We can also see how price slowly started to form a falling wedge where price was making equal lows at the bottom of the range but also consistently made lower highs. On May 26, we had the breakout of the highs and a retest at the bottom of the above mentioned range. June has seen USDCAD push even lower, aiding this move to the downside is the ongoing trade war between the US and China which is having a negative e ffect on the dollar.

HOURLY TIME FRAME

On the 1 hour, we opened the week up just above a very important level of support at 1.34000. For USDCAD to maintain this downward trend, 1.34000 will be a key level to break through for us to see further downside movement. Yesterday, the Canadian Housing Starts data came out positive which was followed by a break below 1.34000 but ultimately, it broke back above that level. We could look at the 61.8 on the Fibonacci tool for this pair to gain further downward momentum again but if we break through that level, the next region to look at would be 1.35270 which sits nicely on the 78.6 and will form a double top as well. We can look at this weeks OPEC meetings and Crude Oil reports which will be important in giving us insight into the direction of this pair. When considering the US dollar this upcoming week, the interest rate decision, FOMC meeting as well as CPIs (Consumer Production Index) and PPIs (Producer Price Index) will play an important role in the strengthening or weakening of the dollar.

As always, trade safe and have a fantastic week further. For updates sent directly to your email, subscribe to our blog.

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