USDCAD finally breaks the upside on elections and oil

A couple of weeks ago I wrote that USDCAD would need to clear 1.3100 before we could think about a proper move higher. The 1.3040/70 level was the key area and the failure to take out 1.31 the first time we went through was a big flashing warning sign

USDCAD daily chart

The failure saw us drop to 1.2850 where the buyers regrouped and with a tail wind of the falling oil price and the announced elections, we've seen a big break of 1.31 to 1.3176

The next big level is the 61.8 fib of the 2002 fall at 1.3465. Go through there and we're looking at 1.38/39/40

USDCAD monthly chart

We'll no doubt get Adam's take on the elections and how the country could be affected. Generally any political uncertainty on this scale is usually negative for the host currency

Oil, on the other hand, is something that is a big constant driver of the CAD at the moment

WTI H4 chart

We're swiftly heading back down towards the lows at 42.00 and we've pushed back below the long term trend line from 1998 which is at 46.65. That was also the low back on the 28th July. The shorter dated broken trend line from Jan provides the closest support point at 45.60/70. Under that it's prior S&R at 44.20 ahead of another support point at 43.50

Looking super long term a break of the 42.00 March low opens the door to a move to 2008/09 lows around 33.55 down to 32.40

WTI monthly chart

As oil is having such a big effect it's going to muddy the waters intraday with what's fundamentally happening in Canada and the US. Fed rate expectations are going to add more bullish fuel to the fire as is the continued falling growth. That keeps one eye on the BOC and whether Poloz goes for another rate cut.

The ducks are all lined up for further CAD weakness so you have the bias for USDCAD longs. Holding 1.31 will be important for this rally, as will a test of 1.3060/70 but again the oil price could have a big say in that and render the tech useless. Buying the dips to these levels is the way to go now and if 1.3060 breaks and holds, then that will be a reason to bail

I still think shorting this pair will be a great trade after the Fed hikes but I wouldn't fight this move here and now