Topside risks are building for USD/CAD as weakness in crude oil prices threatens to send USD/CAD higher, according to George Davis, Chief FIC Technical Analyst at RBC Capital Markets.
Davis says that yesterday’s daily close of crude below its 2015 low at 44.04 (CL1, roll adjusted) means that 41.44 is the next target, and this should add to bullish USD/CAD sentiment.
Davis points out that USD/CAD has been stuck in a sideways consolidation for the past seven weeks – defined by a quadruple bottom at 1.2384 and a double top at 1.2794. A daily close above 1.2794 would uphold his bullish stance, opening up the 2009 high at 1.3063. On the downside, initial support is located at 1.2660, followed by 1.2436 and 1.2384. Strategically, Davis says that the medium and long-term uptrend suggests that pullbacks to 1.2384 and 1.2200 will attract buying interest.
While his medium-term technical price target at 1.2700 remains, Davis will not raise his target until a close above 1.2794 is registered.