Morning Commentary & Currency Insights – November 9, 2018

We have seen the topside of the 1.3050-1.3150 range breached in the wake of the FED statement sending front end rate spreads between the U.S. & Canada towards late October highs.   The blocking of the Keystone XL pipeline project by a federal judge in Montana and the reactivation of NAFTA/USMCA issues have added additional layers of pessimism for the Canadian dollar.  Although the WCS spread may be off recent lows we are unlikely to see any upturn of business investment in the oil sector any time soon while we revert to headline watching vis a vis USMCA. We now look for USD CAD to test September highs at 1.3226 in the short term with 1.3125-50 coming in as first support.

Since Wednesday’s intraday (and false) break of daily trend channel bottom, USDCAD resumed its steady march higher within that channel, reaching new intra- channel high above 1.3170 yesterday and again overnight. Too early to call a top but both hourly and daily momentum indicators are deep in overbought territory so intraday longs should exercise caution above 1.3200 and sellers should take note, and advantage of any extension towards the September 6 peak at 1.3226 and 18 month old descending trend line at 1.3254. Given where momentum indicators currently rest, I would be inclined to fade rallies into that space today (who doesn’t like stepping in front of an oncoming train?). 1.3162/76 acts as initial support zone below with a break below the 1.3141 overnight low needed to relieve some of the pressure to the topside for now. Have a good weekend everyone.

Resistance Levels:

1.3382/86 – June 22/27 double top

1.3311 – Rising daily channel top

1.3290 – July 19-20 double top

1.3254 – Descending resistance line off May ’17 (1.3793) and June ’18 (1.3386) highs

1.3226 – Sep 6 high

Support Levels:

1.3162/76 – Fib retracement zone of current overnight rally off 1.3141

1.3144/1.3110 – Fib retracement of the current broader rally of this week’s 1.3056 low

1.3070/89– 100/21 dma

1.3047  – Nov 2 low

1.3039 – 38.2% fib of the 1.2783/1.3170 October rally

1.2991 – 50% fib of the 1.2783/1.3170 October rally

1.2942/55 – 61.8% fib of the 1.2783/1.3170 October rally / 200 dma

1.2872 – Trend support off the Jan/Oct 2018 lows

1.2783 – Oct 1 low.

1.2622 – Trend support off the Sep ’17/Jan ’18 lows