USD/CAD Chartpack - Technicals, Trading & Hedging Setup

USD/CAD bulls test uptrend-line support, can it be inverse head and shoulder? Trading and hedging setup:

CAD appears to be softer amid soft data run; Oct GDP is due to be announced today and expected flat.

After USDCAD’s price rallies of about 1.02% in November, CAD in December held stronger now reflecting in mixed signals for now as the US dollar will close out the week net higher but well off the mid-week peak, all else remaining equal at this point. 

USDCAD short-term technical looks neutral/bullish that most likely to form inverse head and shoulder pattern (refer daily pattern), the CAD is consolidating last week’s losses through the upper 1.31 area. 

We expected gains to extend to the low 1.32s at least but two failed attempts to crack 1.3180 suggests good supply on USD strength which may drive spot back to the low 1.31 area in the very short term. We spot support at 1.3140 and 1.3115. Key resistance now is 1.3185.

The trend oscillators are leaning USD-bullish, but not decisively so at this point. Intraday price signals and oscillators are less USD-supportive.

On a broader perspective, the major uptrend goes through uptrend line (refer monthly plotting), while trend line support signals strength but both momentum oscillators indicate overbought momentum, current price spike above 7-EMAs. MACD remains in bullish territory.

Trade Tips: On trading perspective, at spot reference: 1.3156 levels, capitalizing both short-term selling sentiments and major uptrend, as bulls are most likely to extend further rallies, in the money call option strategy is advocated using strikes at 1.3102 levels. The trading strategy likely to fetch leveraged yields that would be exponential than spot trades when the forward FX prices keeps spiking higher up to upper strikes on the expiration.

Alternatively, on hedging grounds, contemplating above technical factors, we advocated initiating longs in USDCAD futures contracts of December’19 delivery, we now wish to roll over the positions for January’19 deliveries as further upside risks are foreseen.