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Loonie posted 14-month highs

Market Analysis
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USDCAD, Daily & H1

WTI crude stayed under the $50 mark overnight, and is currently up 0.3% on the day, at $49.39. The modest gain today follows six consecutive sessions of decline, which left a four-week low at $49.03 yesterday. Prices are down by 5.8% week-on-week. Sentiment remains decidedly bearish, with the OPEC-led supply reduction, in place since the start of the year, and looking likely to be extended into the second half of the year, having failed to clear oversupply, with stockpiles at record levels. A surge of U.S. production is also set to hit the market in May.

USDCAD rallied to 14-month high territory of 1.3613, as the Loonie stays under pressure on the back of weak oil prices, and Monday’s threat from the U.S. to impose 20% tariffs on Canada’s soft-wood lumber exports. The U.S. has accused Canada of dumping lumber on the market at unfairly subsidized prices. Meanwhile,

Consequently, the pair drifted today to year’s high. Therefore, a possible closing today between the 1.3600 – 1.3650 key level (i.e. above December 28 peak), will indicate that bullish behavior is like to be continue in long-term. Above there, the pairing will be in 14-month high territory. Therefore, based on the daily ATR (14), if USDCAD’s strength continues, the next resistance level might be at 1.3670.

Meanwhile, in the 1 hour and 4-hour chart, pair presents an opposite performance, giving sings that in shorter timeframes the Loonie will get weaker. In the 1-hour chart, the last candle closed lower at 1.3598, with a big down wick up to 1.3581. RSI is overbought territory at 74, suggesting that there may be scope of a short-term decline within the day.

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Hence, in a daily time frame the closing today will suggest whether a long or short position need to be taken.  In an 4-hour timeframe, if further down candles printed for the next few hours, then a short position is likely to be taken with Target 1 at 1.3560, which is also a confluence of 23.6 Fibonacci level. Target 2 at 1.3540. In this scenario, support could be set at 1.3650.

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Andria Pichidi

Market Analyst

HotForex

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