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USD/CAD Short Term Levels Ahead of OPEC, Crude Oil Inventories

USD/CAD Short Term Levels Ahead of OPEC, Crude Oil Inventories

2016-06-02 09:59:00
Oded Shimoni, Junior Currency Analyst
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Talking Points:

- USD/CAD currently trades below the 1.3100 handle, key support at 1.3050

- OPEC meeting and Crude Oil inventories may amplify volatility for the pair

- GSI is a powerful big data indicator that can help you determine whether short-term trends will continue or reverse

The USD/CAD currently trades below the 1.3100 handle (at the time this report was written) as price appears to fluctuate in anticipation of event risk today. We look to find short term trading opportunities using the Grid Sight Index (GSI) indicator, as the Canadian Dollar might see amplified volatility on correlation with Oil prices.

USD/CAD 5-Min GSI Chart: June 2, 2016

USD/CAD Short Term Levels Ahead of OPEC, Crude Oil Inventories

GSI is a powerful big data indicator that can give you a look at the market in a way that's never been possible before, analyzing millions of historical prices in real time. By matching events in the past, GSI describes how often the price moved in a certain direction.

You can learn more about the GSI here.

Traders may want to use the GSI indicator when price reaches specific pre-determined levels that might offer a proper way to define risk, as a common way to use GSI is to help you fade tops and bottoms, and trade breakouts.

You can use the DailyFX Support & Resistance tool to help determine key levels and volatility for a specific currency pair.

We use volatility measures as a way to better fit our strategy to market conditions. USD/CAD 1-week implied volatility currently sits at 11.23, which is 3.46% higher than yesterday. Price is moving sideways at the time of writing, but with the OPEC meeting and Crude Oil inventories later today, breakout trades might be preferable, if volatility does indeed pick up.

USD/CAD 30-Min Chart, With Crude Oil Overlay: June 2, 2016

USD/CAD Short Term Levels Ahead of OPEC, Crude Oil Inventories

The USD/CAD is trading near resistance turned support at 1.3080. Other levels on a move lower may be 1.3050, which proved influential in the past on a number of occasions, followed by a resistance zone at about 1.3025, with the big 1.3000 handle lurking just below.

Immediate Resistance might be found at the 1.3100 handle, followed by 1.3120, and a resistance zone around 1.3153.

When price reaches those levels, short term traders may use the GSI to view how prices reacted in the past given a certain momentum pattern, and see the distribution of historical outcomes in which the price reversed or continued in the same direction.

With that being said, caution may be warranted around the event risks mentioned today.

USD/CAD Short Term Levels Ahead of OPEC, Crude Oil Inventories

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The OPEC Meeting is of high importance in European and US trading hours; the tentative schedule of the 169th meeting has the opening session scheduled for 08:00 GMT, followed by a closed session at 10:00 GMT, with a press conference by the President of the OPEC conference set for 14:00 GMT. It remains to be seen whether the meeting could generate an agreement on an output ceiling. A failure to do so might cap Oil gains, and in turn limit Canadian Dollar advances as well.

Later today, the weekly Crude Oil Inventories figure is set to hit the wires, which represents the weekly change in the number of barrels of commercial crude oil held by US firms. We will look to see the market’s reactions to the change from the prior -4226K print. Consensus forecasts see a drawdown of 2.66 million barrels.

Meanwhile, the DailyFX Speculative Sentiment Index (SSI) is showing that about 54.1% of traders are long the USD/CAD at the time of writing.

You can find more info about the DailyFX SSI indicator here

--- Written by Oded Shimoni, DailyFX Research

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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