Transcript of Video
Hello everyone, this is today’s video analysis for February 20, 2019. Today we’re going to take a look at the US Dollar versus the Canadian Dollar [USDCAD] for today’s trade analysis.
A couple of different things that we’re going to look at today. Number one is USD strength and weakness and crude oil. We’re going to take a look at that and how it can impact the CAD. We don’t really have any significant Canadian news to impact this currency pair today, so we won’t really pay attention to that as a main focus. It’s really just about the USD and crude oil right now.
First off, before we go to those charts, let’s take a look at the USDCAD daily timeframe. We could see we’ve been stuck in this range, this black box for the past couple of days just above the 100-period moving average here. You could see the green wavy line coming into the chart. So, we were above the moving average and now we’re back underneath it. Also, this green-shaded area. Let me zoom in one time.
The green zone down here towards the bottom. You look back here, where the black circle is around 1.3205, 1.3225, and you see historical support there and of course the current market is currently underneath there. The question is will it stay underneath there. That’s the big question of the day. Will we see it stay underneath 1.3205 or will it suddenly jar back above it like what happened back here at the black circle? So, we’re watching for clues to that as we go through our day.
Now, that being said, let’s put bring up. Let’s put them side by side. The USD index on the right and the USDCAD on the left. USD index also making a break underneath what was support. Take a look at the yellow zone, 96.45, 96.55. We were sitting above there for about five, six days as support. Yesterday, the push underneath it and today we’re holding underneath 96.45, 96.55 as resistance. As long as the USD is under this yellow zone as resistance, the potential of it continuing to go down is there.
Of course we have FOMC today. That may change the trajectory of the USD, or it may see a continuation lower. We’ll have to wait and see. But the fact that the USD is underneath the resistance as well as over here on the USDCAD – we are underneath that 100-period moving average and the green-shaded area –, it gives me more expectation for looking for a short on the USDCAD than it does a long. Only if the USD were able to rally back above 96.55, the yellow-shaded area. If it were to get back above it, would I have any expectation that the USDCAD would pressure higher.
So, for the time being, USD under this resistance. USDCAD under resistance. We would look for resistance. Potential short opportunities. Another caveat here is crude oil. And as we discussed in the Trade Room yesterday, crude oil sitting on top of what is currently support. Take a look at this orange zone. The last two days and now the third day in a row sitting on top of 55.95. Right around that 56-level, but 55.95. Top of the orange zone. Look at historical resistance here acting as support right now. The reason we mention this is often whatever happened, whatever direction crude oil is going in, we look for the opposite direction on USDCAD. Specifically, it’s a positive move for Canada if crude oil goes up.
So, if we see the crude oil price take a significant rise towards the blue-shaded area, we would suspect that the USDCAD would go down. So, a rise in crude, USDCAD goes down. So, with it sitting above support as mentioned on crude oil and has potential to rise, we would look for the potential of resistance and the potential to fall on the USDCAD. Only if crude oil were to suddenly turn around and fall off strongly would we suspect that the USDCAD would turn around and go back up. Because of crude oil’s influence on the CAD, we would suspect that that would either strengthening of the CAD or weakening of the CAD based on what happens here on crude oil.
So, if this were to significantly rise, stronger crude oil prices, USDCAD would typically go down. So, sitting above support means that we would look for resistance on the USDCAD. So, a lot of things to think about there, but overall, the main focus is as long as it’s under this green zone, if crude goes up and USD falls, we would look for the USDCAD to go down, and of course just the opposite.
Let’s go ahead and zoom it back out again. Take a look at it on the four-hour timeframe. Take a look at this. We are clearly on the four-hour timeframe already underneath that green zone, and so our risk is it gets back above the green zone. So, stop losses if you decide to go short are just above the green zone. I would say if you’re going to go short, you want to do it as close as possible to 1.3205, 1.3210, the green-shaded area. And of course your targets on the way down: the pink zone, 1.3170, and then the blue zone, 1.3125 for the USDCAD today.
From Forex Traders Daily, this has been your daily analysis with Ross. If you would like to get Ross’ analysis on all the currency pairs he’s watching and all the trades he takes today, join him in his live Trade Room by clicking on the link below. Please leave any comments you have about today’s video in the comment section below.