USD/CAD Trade Idea
As illustrated in the image above, current prices are forming a ‘head and shoulders’ chart pattern formation, with prices creating the ‘right’ shoulder of the pattern. Technically speaking, we could see prices push sharply higher upon the break of the neckline (orange zone) at around 1.344.
Zooming into the one-hour timeframe, prices are currently trading in a channel down structure with the lower trendline support being tested. A breakout above the channel and the neckline would provide strong technical confluences for a push higher.
- An upbeat tone on Oil prices despite a notable increase in supply increases from OPEC members not complying with their supply curbs , demonstrates a strong affinity for higher oil prices. Typically higher Oil prices tend to boost the strength of the Canadian Dollar , this is because CAD GDP is heavily influenced by Oil related business activity of which underlying changes in the spot Oil prices has an effect on profitability.
- Although the dollar index (DXY) has staged a rebound so far today, it will likely be short lived, as the dollar retraces after weeks of heavy selling, this pair could be pushed higher. However if selling pressure resumes immediately, it is likely prices fall below the neckline and see the structure become invalid.
AUD/USD Key Levels
From the image above, you can see that prices have broken below the ascending trendline which has been followed through with a new lower low and lower high. Prices are approaching an intraday support level at around 0.71250. A rejection here could see further bearish momentum , whilst a break above could see a retest of the major daily resistance zone at around 0.7170.
The recent enforced lockdown in Australia state, Victoria, has triggered a fresh sell off in AUD/USD today which was down around -0.75% heading into the US mid session. Prospects of a further spread of the covid-19 virus could hinder economic recovery , triggering uncertainty and thus the initial sell off in AUD/USD.
- Overnight there is the RBA cash interest rate decision at 05:30 BST. Whilst it is widely expected no changes will be made to interest rates, the focus will be on the tone the RBA sets in terms of economic outlook. Will they side with strong macros where key metrics such as retail sales have posted better figures than the pre covid readings? , or will they take a ‘FED’ stance and acknowledge the breakout in state Victoria will hinder the economic outlook and the ‘rate’ of recovery?.
- Although the dollar index (DXY) has staged a rebound so far today, it will likely be short lived, as the dollar retraces after weeks of heavy selling, this pair could be pushed higher.