USD/CAD continues its recent bearish correction as oil prices rally to a 4-week high. Oil prices benefited from the idea that both oil ministers from OPEC and non-OPEC countries are organizing a meeting to discuss an output freeze. Venezuelan Oil Minister Pinto stated that Saudi Arabia, Russia, and Qatar have agreed on a March meeting. Qatar’s Energy Minister believes an output freeze would drive oil back above the $50 a barrel.
The USD/CAD daily chart displays the bullish trend made a major top at the 1.4689 level on January 20th. The Canadian dollar has accelerated its recent gains as oil prices, its largest export, has shown some signs of forming a potential bottom. If we continue to see weakness with the USD/CAD currency pair (loonie strength), price may find major support from the 1.3375 level. It is around that area that price may form a bullish Gartley pattern. Point D is targeted with the 70.7% Fibonacci retracement of the X to A leg and the 161.8% Fibonacci expansion level of the B to C move. If valid, we could see US dollar strength take price back towards the 1.3750 area.
If the bearish reversal continues, the next support level is the 1.3000-1.3200 zone. If we see a daily close below the 1.30 level, price may target the 1.2831 level.
The trade: Sell USD/CAD at 1.3575 with a stop loss at 1.3675 and take profit at 1.3375. The risk/reward ratio is 1:2