USD/CAD breaks out ahead of Trump’s decision on Iran
Fawad Razaqzada May 8, 2018 8:27 AM
The USD/CAD, which tends to move inversely with oil prices, has finally broken out above the key 1.2900/20 resistance zone after spending several days in a tight consolidation range. The breakout comes ahead of US President Donald Trump’s key decision later on today on Iran. Trump must decide whether his country should withdraw from the international deal offering Iran relief from sanctions in return for dropping its nuclear weapons development programme.
With the Canadian dollar weakening, this might be an early indication that oil prices will fall when Trump makes his decision. The markets may have already priced in the potential withdrawal of the US from the 2015 agreement, or perhaps they are expecting to see some sort of a fudge deal which would effectively still allow allies to continue purchasing Iranian oil. Consequently, we may see a sudden drop in the price of oil after the decision is announced. In fact, this potential outcome should not come as major surprise as traders often employ or expect the “buy the rumour, sell the news” strategy.
If oil prices do fall later today then the USD/CAD could further extend its rally ahead of US CPI on Wednesday. In this case, the next bullish objective would be at 1.3050, the last support pre the latest breakdown. Above this level, the next levels of potential resistance or bullish objectives come in at 1.3150, 1.3150 and 1.3220.
However, if oil prices go significantly higher following Trump’s decision then this may cause the breakout on the USD/CAD to turn into a potential fakeout. Even so, the USD/CAD will still have to fall below the 1.2835 level before the bias turns decisively bearish in the short-term. This level was the low prior to the breakout, so price shouldn’t go below it if the bulls are to remain in control.
Source: eSignal and FOREX.com.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.