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Market View

A potential Setup for USDCAD

Tuesday, May 28, 2019 4:16 PM GMT

As we are heading towards tomorrow’s monetary meeting of the Bank of Canada, a potentially rewarding bullish scenario could materialize for USDCAD if the pair tests the 0.618 Fibonacci level, shown at the 1-hour chart.

The pair has formed a triangle that could potentially be crossed north, targeting the 1.3561 level.

USDCAD Daily Chart

 

USDCAD 1Hour Chart

The bullish scenario should be considered busted if the pair reaches the 1.3390 level.

 Strengths of USDCAD / Weakness of CAD:

  • downward revision of expected GDP growth from the BOC and negative m/m GDP.
  • fiscal policy expected to have a -0.2% net effect in GDP growth.
  • weak government until the upcoming elections on October.
  • deteriorating macro readings: GDP (negative m/m number), wholesale sales, labor productivity, capacity utilization, Manufacturing PMI (bellow 50), Ivey PMI, foreign securities purchases, manufacturing sales

 

Weakness of USDCAD / Strengths of CAD:

  • tariffs for the Canadian steel and aluminum imported to the USA have been recently lifted.
  • OPEC's latest monthly report included no downward revision of the global demand growth, and no increase of the Saudi Arabia's and UAE's production. Iran's production during the last month of granted waivers was 2,5mb/d.
  • Iranian oil is supposed to be out of the market, pressing prices upwards.
  • housing market is expected to pick up in 2H19, following the stabilization in Toronto and Vancouver.
  • improving macro readings:  unemployment, inflation at the BOC's target, Ivey PMI, retail sales, wholesale sales, manufacturing sales, employment change, current account, trade balance, housing starts, building permits, corporate profits

 

Disclaimer

The views expressed do not constitute investment or any other advice /recommendation /suggestion and are subject to change.Reliance upon information in this material is at the sole discretion of the reader. Opinions expressed in the report do not represent the opinion of Zulutrade and do not constitute an offer or invitation to anyone to invest or trade.

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