The Canadian dollar remains heavy as oil prices continued to slide for a third consecutive day. The loonie was also under pressure following President Trump comments. He stated, “What Canada has done to the US dairy industry is a disgrace, the same is true of US timber industry. The US President also noted that they need to get to the negotiating table very quickly with Canada.
Separately, we also heard that the Toronto province is also considering a 15% tax on property purchases by foreign buyers. The real estate market is another key concern for the Bank of Canada.
Price action on the USD/CAD daily chart shows that recent rally is tentatively respecting the 1.3500 handle. If we see a break above that level, price may not find resistance until the 1.3725 to 1.3800 region. It is around that area that we could see price form a bearish ABCD pattern. Point D is targeted the 161.8% Fibonacci expansion level of the B to C move. If we see price consolidate here, major support will come from the 1.3200 region.
The trade: Sell USD/CAD at 1.3725 with a stop loss at 1.3825 and take profit at 1.3425. The risk/reward ratio is 1:3