Jump to content

USDCAD and what it might mean for Oil


Mercury

Recommended Posts

The twin factors that most impact USDCAD are USD itself (i.e. FOMC, NFP, key US economy data etc) and Oil, which is a major factor driving the Canadian economy. And it is easy to see an inverse relationship between USDCAD and Oil on price charts (check it out on the monthly or weekly charts). So looking at USDCAD can give extra insight into Oil moves, as well as being a secondary FX decent trading vehicle itself.

 

Fundamentals

I am bullish on USD long term, I believe a general downturn, not to say crash, will trigger a flight to safety and that means USD and Gold, possibly long term US bonds for a while unless or until the bond bubble bursts and then it is cash and gold while all else goes red. But we aren't there yet, stock indices have yet to reach a final tipping point.

 

Technicals

On USDCAD big picture (monthly chart below) we can see that if USD does go on another bull rally phase then this ought to happen on USDCAD as well unless something dramatic happens with Oil (i.e. a massive rally, unlikely I think...).  Therefore we can safely conclude that a rally is due on this pair BUT the key question is whether the wave 4 retrace (purple 4) is over yet. Currently USD (DX) is in a retrace down while EUR and GBP are rising and thee Yen is also strengthening.  This is likely to be a temporary situation I believe.  USDCAD on the other hand is rising and this is in opposition to USD direction so it must be Oil influenced and Oil is falling but is it nearing a rally?  Of note however is that USDCAD is back into the resistance zone where Wave A terminated.

 

Looking now at the Daily chart we can see the bear run down from the high at 20 Jan and this could have concluded in May 2016.  However there is another potential scenario building, which should be resolved soon one way or the other, and that is a Wave 3-4 retrace (Blue labels) to Fib 38% (in A-B-C form) before a final leg down to the Fib 50% drawn off the Wave 2-3 (purple labels) on the monthly chart.  Negative Momentum Divergence is building with RSI and Stochastic supporting a move lower.

 

Now looking at the Hourly chart we can see that A-B-C retrace and that the market is likely into the concluding leg up of the Wave C (which is always in a 1-5 form).  Interestingly the market produced a classic overshoot of short term support to bring up the wave 4 and rallied strongly back above support zone (providing a decent short term Long opportunity).  If we now see a small 1-5 rally up to the Fib 38% and associated Resistance zone and then see a confirmed turn then the likelihood of a large run down to that Fib 50% Wave 4 (Purple) is high.  After that the USD rally would get underway.

 

Note: this would all fit with a medium term retrace in USD and rally in Oil.  We likely have the former so watch out for the latter, which is a distinct possibility I think.

 



Link to comment

aud usd 2h.png

if DX continues on this trajectory, which currently technical suggest they are, this therefore would justify the increase pressure on oil, I do share your analysis, i remember a while back we discussed this scenario, and therefore looking for long opportunities now should be the opportunities, unless you fancy little shorts here and their (risky of course).

Link to comment

Yeah thought that was it  but just to clarify, while I am bullish USDCAD long term I think there will be a strong retrace first and possible to a lower low on the Daily/weekly chart.  This would coincide with a retrace on DX and a rally on Oil.  After that Long USD across the board and short Oil.

 

My point is that the near term resistance zone on USDCAD (13,300 ish) is a pivotal moment.  A strong break above negates my above view for a retrace first but a strong rebound back off that resistance confirms it.

 

Is that how you see it or are you long term bullish from here?

Link to comment

Ok we are on the same page, just checking.

 

BTW, I have a contrarian alert this morning on Oil.  An investment weekly periodical just announced that "Oil is heading for a bear market - again".  This after calling Oil bottom before.  This has literally just dropped into my inbox in the past hour and check out Oil...  Ok it doesn't respond like that but it is telling for me.  The only reason given was that WTI was down 20% on the recent highs.  For technical traders that is a reason for a retrace, which is why the MSM is usually so behind the curve.

 

If confirmed this Oil move may well be a decent retrace rally or something more, let's see.

Link to comment

A couple of watch outs on USDCAD, although price did indeed rally out of that possible support zone it has now returned, bounced away again and is currently again returning so the market can't seem to get away.  This brings up the possibility that the Wave C high I was looking for has already happened and a break back through that support zone brings the drop earlier than anticipated.  If we consider that USD is currently bearish then maybe that is driving this action.  If Oil then turns for a rally (whether substantive or merely a retrace of the current downward move) then USDCAD should drop.  And Oil is at another potential support zone.

 

This one is not yet clear but I would say a drop through the support zone is a Short signal, especially if we also see a drop on DX and a rally on Oil.

 

Any thoughts?

Link to comment

Quick update on this pair in light of Oil moves, the Wave 4 (Pink label) high seems to be confirmed, just short of my Resistance zone, and now does it look like a nice 1-2 retrace (blue)(4hourly chart) to set up a strong drop in wave 3 is about to kick off?  On the Hourly chart there were a couple of support zones broken and retested twice before dropping away.  This looks like a decent set up for shorting and if Oil does catch a bid then this pair could run far, maybe even 1000 points worth, before hitting significant support.

 

Please let me know if you see it differently!

 

 

Link to comment
  • 2 weeks later...

Thought it would be an idea to look at this commodity/heavily influenced dollar pair and for a while was slightly puzzled as to what type of trend was $CAD trying to tell me and as you highlighted their, I have came to similar conclusions, although it appears that between early May and late July the market was forming a triangle and therefore since B = 5,3,5 waves B appears to be already complete.

usd cad DAILY.png

usd cad WEEKLY.png

 

 

Link to comment

I tend to prefer the Weekly/Daily/Hourly to 4 Hourly, using the latter only to compact the hourly when the move is drawn out.  Looking only at the Daily on this one (because the whiplash is too challenging to work with the hourly just now) I have a Triangle formation in the retrace and am not sure if the Wave 4 has yet been achieved.  It is certainly a bit up and down, which is typical of a complex EWT 3-4 retrace.  There are 2 possible positions for the Triangle lower line, not sure which is right yet.  The key for me here is to wait for a break out of the Triangle either up or down, but I think down, and/or a rally higher to the Fib 38% Wave 4 completion.  This could happen on either a USD rally or an Oil retrace and final rally up.  I thing both are likely but perhaps the latter is more imminent.

 

 

Link to comment

Archived

This topic is now archived and is closed to further replies.

  • image.png

  • Posts

    • Hi I have Rolls Royce shares in my IG account and realising they do not pay a dividend I saw they issue 'C' Class Shares which need to be redeemed: Payments to shareholders | Rolls-Royce Has anyone any experience of redeeming these or getting information/option requests from IG??? I have been trying for weeks to get information from the Corporate Actions Team, and am still waiting?? 
    • Wheat Elliott Wave Analysis  Function - Trend Mode - Trend Structure - Impulse for wave (A) Position - Wave 5 of  (A) Direction - Wave (B) Details -  Wave 5 of (A) could be completed with an ending diagonal. Pullback for (B) should begin afterwards. Since March 2024, wheat prices have been recovering and extending higher. However, a slowdown and a potential downward correction may occur in the coming days. Despite this, the overall recovery trend is expected to continue afterward. The initial recovery from the low of 523 in March is projected to advance towards the 840-940 range in the medium term. Nevertheless, the long-term bearish trend could resume in the last quarter of the year.   Examining the daily chart, we observe a bearish impulse wave that began at 1364 in March 2022, culminating in an impulse wave that reached 523 in March 2024, thus concluding a two-year sell-off. The subsequent recovery from 523 is nearing the completion of an impulse wave. This suggests that we should anticipate at least an (A)-(B)-(C) bullish correction continuing towards higher price levels, likely in the 842-942 range, which corresponds to the 38.2-50% Fibonacci retracement zone. It is also possible for prices to move even higher. This bullish corrective cycle is projected to extend until the last quarter of the year. For now, the focus should be on the completion of wave (A) and the potential for a retracement in wave (B).     The H4 chart reveals that wave (A) is nearing its completion, forming an ending diagonal for wave 5. A bearish retracement for wave (B) is anticipated to start soon. The prudent strategy at this juncture is to wait for wave (B) to complete before considering long positions in wave (C), provided wave (B) does not breach the 523 low.   In summary, while wheat prices have been on an upward trajectory since March 2024, we may soon experience a short-term correction. However, the broader recovery trend is expected to persist, with prices potentially reaching the 840-940 range. Traders should monitor the progression of wave (A) and prepare for the likely retracement in wave (B). By closely observing the key level of 523, traders can ensure that the bearish wave (B) does not invalidate the recovery trend. If wave (B) remains above this level, the subsequent wave (C) could present a favorable opportunity for long positions, aligning with the projected medium-term bullish correction before the resumption of the long-term bearish trend later in the year. Technical Analyst : Sanmi Adeagbo Source : Tradinglounge.com get trial here!  
    • BlockChainPeople is diving deep into the minds of blockchain users, trying to understand what makes them tick. Interesting stuff. Messari, these crypto detectives uncover hidden data and trends in the crypto market.  Coin Center, policy peeps focused on shaping the future of blockchain regulations.  The Graph, Imagine Google Search, but for everything blockchain – that's The Graph! So, is BlockChainPeople the only way to learn about blockchain? Nope! There's a treasure trove of resources out there waiting to be explored. And it also just got listed on Bitget, spectacular right? What are your thoughts? Are you curious about the psychology of blockchain users, or are you more interested in general blockchain education? Let's hear your thoughts in the comments.
×
×
  • Create New...
us