With crude oil taking on more hits, I’m looking at this fresh bullish breakout on USD/CAD. Think it’s not too late to catch this move?
Asian session traders seem to have woken up on the wrong side of the bed, following the return of risk-off flows during the U.S. hours.
If this kind of market sentiment persists, the safe-haven Greenback could see more upside versus the higher-yielding Loonie, which has been bogged down by the bearish crude oil reports.
Fresh Market Headlines & Economic Data:
- French coronavirus death toll jumps by 1,438
- BOC: Commodity-driven economies being hit hard, impossible to judge when economy will recover
- EIA crude oil inventories up 19.2M barrels vs. 12.2M forecast
- IMF: Pandemic to halt Asia’s 2020 growth for first time in 60 years
- WHO: Reviewing the impact of halted U.S. funding as global COVID-19 cases top 2 million
- IEA: Coronavirus outbreak to erase nearly a decade of oil demand growth
- U.K. BRC retail sales monitor down by 3.5% vs. expected 5.5% slump
- Australia’s MI inflation expectations up from 4.0% to 4.1%
- Australia added 5.9K jobs in March vs. projected 33K drop, unemployment rate up from 5.1% to 5.2% vs. 5.4% consensus
Upcoming Potential Catalysts on the Economic Calendar:
- German final CPI and WPI at 7:00 am GMT
- Swiss PPI at 7:30 am GMT
- BOE Credit Conditions Survey at 9:30 am GMT
- Euro zone industrial production at 10:00 am GMT
What to Watch: USD/CAD
This pair busted through the top of its falling wedge formation on the 1-hour time frame, hinting that further gains are in the cards.Dollar demand has been on the rise in the past trading sessions as risk aversion is back in play. Meanwhile, the oil-related Loonie could keep slipping as the commodity caught strong bearish vibes from the IEA report.
Market analysts noted that the COVID-19 outbreak is bound to hurt global demand by 9.3 million barrels per day and that the OPEC output deal might not be of much help.
Don’t forget that the BOC also added to its easing efforts through provincial and corporate bonds, with Governor Poloz citing that commodity-driven nations are being hit hard right now.
With that, USD/CAD could climb by roughly the same height as the wedge formation from here.Just be careful when jumping in a long position at market, though, as the 100 SMA is still below the 200 SMA while stochastic looks ready to head south from the oversold region.
A conservative entry on a pullback to the broken wedge resistance near the 1.4000 handle could offer a better R:R, but this could also run the risk of missing the rally entirely.
A break past the recent highs around 1.4130 could let you catch the bullish momentum. Just don’t forget to check the average daily USD/CAD volatility when setting stops and targets!