USD/CAD has traded higher for seven consecutive days and could be poised to run towards the 1.50 handle if we see oil prices remain under pressure and below the psychological $30 level. With only Canada’s New House Price Index to be released on Thursday, we may see the loonie to take its queue from oil’s price action.
The USD/CAD daily chart displays the bullish trend has firmly been in place once price took out the 1.40 handle. Price also invalidated the bearish ABCD pattern that formed last month. Point C was confirmed just ahead of the 50.0% Fibonacci retracement of the A to B leg, while Point D was targeted with the 161.8% Fibonacci expansion level of the B to C move.
If bullishness continues, the next resistance level is the 1.4450-1.4500 zone. If we see a daily close above the 1.45 level, price may target the psychological 1.50 handle.
If we see do see a major bounce in oil prices, the loonie could firm up and target 1.40 support level.
The trade: Buy USD/CAD at 1.4200 with a stop loss at 1.4150 and take profit at 1.4450. The risk/reward ratio is 1:5