FxWirePro: USD/CAD Chartpack – Technicals, Trading & Hedging Setup

USDCAD has been dipping ever since the spinning top occurrence at 1.4512 levels that nudges prices below DMAs, any abrupt rallies could be deceptive to struggle to get support from both the leading and lagging oscillators (refer daily chart).

As stated in our previous post, the pair failed to sustain the minor rallies, the interim rallies in the minor trend unlikely to extend upswings as long as the current price slid below DMAs with bearish DMA & MACD crossovers as both RSI and stochastic curves show downward convergence.

However, it is unwise to buck the major trend which is bullish and unwise to activate fresh shorts as you could see the 2nd chart.

On a broader perspective, the major uptrend that was spiking through the uptrend line so far, ever since the failure swings were observed at the peaks of 1.4667 levels the bears attempt to create some downside traction but they appear to be vulnerable in the major trend.

For now, as it has signalled only momentary weakness as the current price slides below 7 & 21-EMAs, one can think of some trading ideas using boundary strikes.

Overall, we continue to reckon that further downward pressure on the USD will emerge momentarily as the H1 of 2020 develops. Key resistance now is 1.4155 and major resistance is 1.4667. We target a drop to 1.3816 (at least) and 1.3730 in the medium term.

At spot reference: 1.3890 levels (while articulating), boundary options strategy is advocated using upper strikes at 1.3930 and lower strikes at 1.3775 levels. One can achieve certain yields as long as the underlying spot FX remains between these two strikes on the expiration.

Alternatively, we recommend directional hedges that comprised of longs in USDCAD futures contracts of April’20 delivery, simultaneously, longs in futures of May’20 delivery for arresting bullish risks in the major trend. The short leg is likely to hedge potential slumps in the short run. Thereby, one could be able to directionally position in their FX exposures on hedging grounds.