USDCAD is down for a third consecutive day, this time making 11-day lows under 1.2900. The pair has been hit by two things, one being Friday’s post-U.S. jobs report losses, which has eroded Fed tightening expectations, and the other being a rally in oil prices. News that Russia and Saudi Arabia had signed an agreement to set up a “working group” to think of ways to curtail crude market volatility boosted oil prices. The drop in USDCAD since Friday has breached below both the 20- and 50-day moving averages, at 1.2956 and 1.3010, respectively, which now revert as resistance markers. The pair remains without bigger-picture direction, having continued to trade in a broadly sideways manner since March. Focus this week will fall on Wednesday’s BoC policy meeting and Friday’s Canadian August employment report, which we don’t expect will upset prevailing USDCAD sentiment.
The breach and break of the 20 DMA yesterday triggered our SHORT position at 1.2930 near term Target 1 at 1.2875 and Target 2 below the recent 23.6 Fibonacci level and set at the two week ATR 1.2835. Further down support arrives at the August low 1.2770 and the June low at 1.2690.
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