With oil price making a new short-term low at 46.45$ one would expect USD/CAD to be above its recent high at 1.2965. Instead price is pressured by sellers and it lags behind showing that the main trend remains bearish and this is only a corrective bounce.
As one can see above in the oil chart, despite the new low the oscillators are diverging. This is just a warning for oil bears to be cautious. Additionally the form of the decline from 48.75$ is far from impulsive. This implies that the up trend is not complete. So oil has a lot of chances of making a bullish reversal and a new high. This affects USD/CAD negatively.
As I had pointed out earlier through my twitter account, USD/CAD may be following the above fractal map. Need to be patient and a break below 1.2855 will increase the chances of this bearish scenario playing out.
In the final chart above I want to show you where we currently are trading. Price has stopped its rise at the 38% Fibonacci retracement of the decline from 1.32 and at the same time right below the broken triangle pattern. This is an important back test.
Usually after a breakdown of a triangle we see a back test and a rejection. A rejection here will increase a lot the chances of the bearish scenario playing out.
I’m bearish and short. Above 1.2965 things will not be good for bears…at least for the short-term as we could see a 100 pip bounce. In the longer-term as long as price is below 1.32 I can see even a decline towards 1.20-1.15.
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