Trade idea background-See Saxo Bank’s Trading Floor
The USDCAD spent most of July in a downtrend but failed to break strong US dollar support in the 1.0240-60 area. Canadian data releases have been on the soft side (May GDP +0.2 vs forecast of 0.3 percent) while US data has been mixed to firmer (US Q2 GDP 1.7 percent vs forecast of 1.2 percent). The WTI/USDCAD correlation appears to be back as shown on Chart 1. The break above 1.0310 suggests that a short-term bottom is in place at 1.0255.
Trade management and risk description
This is a short-term range based on bullish US short-term technicals. It is vulnerable to a) a more dovish-than-expected Federal Open Market Committee outcome today and b) weaker-than-expected US payrolls data tomorrow.
Trade idea parameters
Entry: Buy USDCAD between 1.0315-20
Time horizon: one week