usdcad potential push up towards key resistance zone of 1 33203380 before bearish reversal as outcom

We will see the conclusion of three days of “informal” OPEC meeting held in Algeria where market participants are awaiting whether there will be a production freeze agreement among OPEC producers to reduce the global glut of oil supplies. Media has reported earlier that Iran has rejected an offer from Saudi Arabia to limit its current output of oil production in exchange for the Saudis to cut their oil supply as well.

Therefore, it is highly likely that the conclusion of today’s informal OPEC meeting will be a no deal agreement for a production cut among OPEC members. In the foreign exchange market, the CAD is the most sensitive currency to developments in the oil market.  A no deal agreement today will likely see a drop in WTI crude oil which will be negative for the CAD at least in the short to medium-term.

Let’s us decipher the potential movement of the USD/CAD from a technical analysis perspective ahead of today’s informal OPEC meeting outcome.

USD/CAD

(Click to enlarge charts)

Key elements

• Since the major swing low of 1.2461 printed on 03 May 2016, the USD/CAD has climbed up steadily to print a high of 1.3253 on 27 July 2016 (up 6.36%) in line with a stabilization seen in benchmark oil prices with the WTI crude oil that has traded within a range of USD50 to USD 39.00 per barrel in the past quarter. However from a technical analysis perspective, this up move has appeared to be not impulsive in nature (rather a potential corrective bear rally) as it has evolved into a bearish “Ascending Wedge” configuration (depicted in dark brown) (see daily chart).
• The appearance of such bearish “Ascending Wedge” formation depicts a slowdown in upside momentum despite an upward climb in price action of the USD/CAD as the magnitude of the swing highs is getting lesser than the magnitude of the swing lows as the upward price moment progresses. The lower boundary (support) of the “Ascending Wedge” is now at 1.2900 (see daily chart).
• The key resistance is at 1.3320/3380 which is defined by the upper boundary of the aforementioned bearish “Ascending Wedge” and a Fibonacci cluster.
• Based on fractal analysis, the USD/CAD has also started to evolve into a shorter-term bearish “Ascending Wedge” (depicted in red) in place since the medium-term swing low of 1.2823 printed on 06 September 2016. Interestingly, the upper boundary of this mini “Ascending Wedge” also corresponds with the aforementioned key resistance at 1.3320/3380.
• The 4 hour (shorter-term) Stochastic oscillator is now coming close to an extreme oversold level which suggests that the USD/CAD is likely to see a potential push up in price action soon after a minor sideways movement between 1.3237 and 1.3161 in place since yesterday.

Key levels (1 to 3 days)

Intermediate support: 1.3170

Pivot (key support): 1.3135

Resistance: 1.3320/3380

Next supports: 1.3000 & 1.2900

Conclusion

As long as the 1.3135 short-term pivotal support holds, the USD/CAD is likely to see a potential short-term push up towards the key resistance zone at 1.3320/3380 before a potential medium-term bearish reversal materialises.

However, failure to hold above 1.3135 may invalidate the preferred short-term push up scenario and trigger the medium-term decline to target the next supports at 1.3000 follow by 1.2900.

Charts are from eSignal

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