Does this mean people should stop trading? Not at all but it might be time to get savvy and think of alternative routes that can allow you to take advantage of the situation without taking on insurmountable risk.
Oil is not the only instrument affected by Monday’s events, there’s always a ripple effect and in this case, commodity currencies are the most affected currencies. That’s why we’re analysing the top three Canadian Dollar (CAD) pairs which are negatively correlated with oil and may present great near-term trading opportunities in the wake of the oil market crash.
The USDCAD Pair
The first pair is the USDCAD, otherwise known as the Loonie. The pair did not suffer at all from the recent oil plunge, instead it moved lower, failing to push to new cycle highs. This shows that the Canadian dollar has strengthened against its American counterpart.
At the time of writing, The USDCAD pair is testing the upper bullish trendline at around 1.4130. If this support is broken, the short-term outlook could change from bullish to bearish with the next bearish target being at 1.40, which the price has hit in previous lows.
Another bearish level to keep an eye on is the 1.3920 support, which could be a medium-term target for bears. There is a nice bearish divergence between the RSI indicator and the price on the hourly chart, this could help in pushing the USDCAD pair lower.
Alternatively, should the pair start rallying again, the critical resistance might be at the current cycle highs of 1.4250. If bulls push the greenback above this zone, we could see a strong rally toward the 1.45 level.
The EURCAD Pair
The situation on the EURCAD cross is quite similar. There is a bearish divergence, with the price slowly drifting lower from recent highs.
The bullish trend line is currently at 1.5320, if the cross drops below this zone, the short-term outlook could change from bullish to bearish, targeting previous lows of 1.5220.
Alternatively, if the price continues to rally, the resistance is at cycle highs near the 1.5430 level. The next target for bulls could be at 1.56.
The GBPCAD Pair
The GBPCAD cross pair is in a short-term downtrend, and the price has been in a bearish channel over the previous hours.
The intraday support seems to be near the lower line of the canal near the 1.74 level. If broken, the next level to watch will be in the 1.7350 zone, where previous lows were located.
The next target for bears could be at around 1.72.
On the other hand, the resistance could be found in today’s high of 1.75, if it doesn’t get held, the price might reach the upper line of the channel, which is near the 1.7600 level.
If oil starts rallying – even a short-term relief rally – the Canadian dollar will potentially see gains.