USD/CAD – Breakout or Fakeout?

USD/CAD – Breakout or Fakeout?

USD/CAD – Breakout or Fakeout?

For the first time in the last 12 trading days USD/CAD closed above 1.3000. Oil prices help to drag the Loonie lower as hopes of a production freeze fade. Iran stated that it would only cooperate with a production freeze if other oil exporters recognized Iran’s right to regain market share. Iraqi Prime Minister Haidar Al-Abadi reached an agreement with KRG Premier Nechirvan Barzani during a meeting in Baghdad to start “technical talks” between the federal oil ministry and the KRG Ministry of Natural Resources. According to a report from Bloomberg, Saad Al-Hadithi, spokesman for Al-Abadi, said that Iraq’s prime minister stressed the necessity to boost oil output. Oil remains an important driver for CAD but Canada also reports its current account balance numbers tomorrow followed by GDP numbers later this week -- we expect these reports to be weaker, paving the way for a further rally in USD/CAD.

Technically, if USD/CAD can hold above Monday’s low of 1.2975, then a major breakout is in place. The latest move has taken the currency pair above the 20 and 50-day SMA along with the 23.6% Fibonacci retracement of this year’s decline. There’s no major resistance until 1.3140, where we have some spike highs. If USD/CAD drops below 1.2975 however, it may slip as low as 1.29.

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