USD/CAD – Major Reversal Lower Possible As Oil Stabilises

From the FXWW Chatroom: One of the conviction FX trades heading into ‘16 was to remain long USD/CAD. Wild oil price predictions from respected commodity watchers suggested crude might test levels between USD10-20 before finding a base. The damage done to the Canadian economy was expected to force the BoC to explore further easing options while the Fed embarked on a sustained tightening cycle. NYMEX crude now appears to have bottomed; a break above the descending 200-DMA (41.03) would confirm this. The Canadian economy is showing signs of improvement as evidenced by Friday’s strong employment report. It isn’t a stretch to predict the next BoC move will be a tightening of policy – even though it might only happen in very late ‘16/early ‘17. Technically, USD/CAD looks vulnerable. The 50-DMA has crossed below the 100- DMA, suggesting the long term trend higher has run out of gas. Key support lies at Fibo 38.2% of the 0.9407-1.4689 move up at 1.2670. A break below could see the trend lower accelerate towards 1.2000.  [IFR]

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