Forex Trading Idea USD/CAD
Buy 1.3430 for 1.3850 or 1.4000. Stop can be placed below 1.3250.
Since the high at 1.4667 on 19 March 2020, price has been on a decline. On the 8 June 2020, price reached a low of 1.3356. Today, on the 9 June, price is moving off the low. A bullish Engulfing candlestick pattern could be forming. If today, New York closes above 1.3440, we will have confirmation of a bullish Engulfing candlestick pattern. This is a reversal pattern. It means that price has likely found a bottom and is changing trend direction.
The low of 1.3356 is also just below a previous high back on 3 September 2019 at 1.3383. The areas around September to October peaks are likely to provide support for the decline and if these supports can halt the decline, price is likely to reverse trend. MACD is bearish but is turning around; hinting that a low may have formed. Stochastic is also turning around from the oversold zone, hinting of a possible turnaround as well.
If price turns around, it is likely to head back to 1.3850, which is just above the Fibonacci 50% correction point. Another possible target area is the Fibonacci 62% correction point at 1.4000. These are the 2 likely targets over the next 3 months for this pair.
Crude oil price has rallied from below US$10 to nearly US$40 and this has helped the Canadian dollar to strengthen from 1.4667 against the US dollar to a low of 1.3356. Crude oil price is near to a strong resistance at US$41.18. Currently WTI crude is at US$37 but if it cannot move above this gap resistance, it is likely to head lower.
There is a danger than recent rise in crude oil prices is running ahead of global recovery in demand. Reopening of global economies is likely to increase demand for crude oil but OPEC + Russia have cut 9 million barrels of oil off production. These countries will be raising their production which is likely to dent the rally in crude oil price. Saudi Arabia has already stated it will increase production in a month time. Additional supplies from Libya and shale producers from the U.S. are likely to increase production numbers and keep price down.
Bank of Canada has presented In June 2020 an outlook that is not too rosy and this is likely to cap the Canadian dollar’s strength.