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USDCAD rallies as oil drops 5%

USDCAD rallies as USOIL falls to the levels I talked about yesterday (range low at 81.25). Weakness in oil is related to low demand from China where Covid still remains a problem. Harsh lockdown measures are the only tool the government has (in the absence of mRNA vaccinations) in the fight against the coronavirus.

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USDCAD chart 11 18

USDCAD hits the upside target

USDCAD rallied to my upside target of 1.3380. You might remember the signs of strength I talked about in yesterday’s report. They pointed to this market rallying higher. You can find yesterday’s USDCAD analysis here. The fundamental trigger was weakness in oil. USD rallied against the CAD as the price of oil dropped significantly lower. The market has now made a return move back to the channel high and bounced higher. The nearest S&R levels in the market are  1.3200 and 1.3400. If there’s a decisive break above 1.3412 the market could stage a significant rally.

USOIL chart 11 18

USOIL drops on weak demand

The weakness I expected to see in USOIL (here) materialised and oil moved to the range low I was talking about yesterday. China’s increasing number of covid cases erode oil demand projections resulting in USOIL dropping almost 5% yesterday. It is now trading right above the 81.25 support level (the range low). If the 81.25 low is violated the market probably moves to 78.50 or so. If the market rallies from the support the nearest resistance level we need to pay attention to is at 83.53.

Gold chart 11 18

Gold bids soften as yields rise

Gold lost 0.74% yesterday and traded almost down to the 1753 support. The market is now in a phase where it could be reversing its recent bull run. If we get a lower swing high below the high of 1786 we have further evidence of the green team losing ground to the red team. The bulls can only negate the bearish indications if they manage to push the market decidedly above 1787 high. The US 10. Yr yield moved higher yesterday on Bullard’s comments about Fed needing the hike the rates further. This was pressuring gold even though the dollar hasn’t rallied but is moving sideways. 

GBPUSD chart 11 18

UK retail sales beat expectations

At the time of writing this Cable is bouncing up and down in an hourly trading range. The UK October retail sales came in at 0.6% (0.3% m/m expected) which didn’t really impact the market that much. The price range is located near to a descending top of a formation you can see in the 8h  chart above. If we get a breakout from this formation Cable probably moves at least to the latest high at 1.1957. If on the other hand the support at 1.1881 breaks then the formation width gives us a downside target of 1.1827.

Learn to trade better

Did you know that the reason why price action analysis works is that the patterns are repeated over and over again? The reason I analyse the markets every morning is to provide you with an understanding of what to pay attention to in price action. Over the last couple of years, I have produced a vast archive of past analysis reports that you can read and compare to price action in the markets I have written about. 

See what I wrote about a market and then go and see what technical factors were at play at the time. This increases your understanding of what moves the markets and how. Then you should also study price action in the time frame you usually trade.

So if for example, you trade using 10-minute charts open a gold chart and carefully study yesterday’s price action making notes on what kind of entry strategies and exit strategies would have worked the best. 

When you do this every day you learn fast and become much more efficient reading price action. This is a great skill for any intraday traders who need to make a lot of quick decisions throughout the trading day. You can find my recent gold analysis here, here and here

 The Next Main Risk Events

  • USD Existing Home Sales
  • AUD RBA Gov Lowe Speaks
  • CAD Core Retail Sales
  • CAD Retail Sales
  • USD Richmond Manufacturing Index
  • USD FOMC Member Mester Speaks
  • USD FOMC Member George Speaks
  • USD FOMC Member Bullard Speaks

For more information and details see the TIOmarkets economic calendar here

Trade Safe!

Janne Muta
Chief Market Analyst

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