Since having a daily close above the 50-day SMA, USD/CAD remains on a tear. The most recent wave of weakness was stemmed from concerns that we could see oil prices drop to the $20 area on global supply glut concerns.
The USD/CAD daily chart displays the bullish trend that is nearing major resistance from the 1.3456 level. If the bullish move continues above the noted resistance level, we will see an 11-year high and price could target the 1.3600 handle.
The daily chart also shows the potential formation of a bearish ABCD pattern. If valid, we could see a reversal target the 1.3200 zone Point D is targeted by the 161.8% Fibonacci expansion level. The bearish move could gain momentum if we continue to see oil prices stabilize here. All eyes will be on the December 4th OPEC meeting. If we see Saudi Arabia become willing to help stabilize the market, we could see a major bounce with oil prices.
If the bearish correction occurs and price closes below the 100-day SMA, we could see price target the 1.2800 area. If the currency pair continues its bullish trend, major resistance lies at the 1.3842 level.
The trade: Sell USD/CAD at 1.3375 with a stop loss at 1.3475 and take profit at 1.3075. The risk/reward ratio is 1:3