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July 29, 2021

How To Trade The Loonie This Week And The Week Ahead

Frank Cabibi

7/29/2021

To report:ActualForecastPrevious
CPI m/m0.3%0.4%0.5%
GDP m/m--0.3%-0.3%
https://www.forexfactory.com/calendar?week=jul25.2021

Our outlook

CAD pairs are moving in favor of the loonie for the most part this week as oil prices continue to surge. US oil inventories beat expectations once again which is a good sign for oil's demand and a good sign for the Canadian economy. Gold also helps Canada a good bit, which has been performing pretty well on a slowing US economy. I like CAD's strength going into next week, but GDP tomorrow will definitely be an impactful factor in the loonie's strength.

https://tradingeconomics.com/canada/inflation-cpi

Canada's inflation rate chart above actually shows some slowing in inflation which is the opposite of what Powell says about the USD's inflation rate. The Fed expects a higher rate going forward although he argues that it is transitory and not inflationary. Either way, CAD is starting to look much better after this news and could see some strength this and next week in my opinion.

Trade Setups

USDCAD

UC looks pretty bearish right now, especially if it can't bounce off this support zone. The pair also broke under a rising trend line on the 1D chart which looks increasingly bearish. If price bounces, it will likely retrace on its 200 DMA which is also a resistance level around 1.26000. But, if price doesn't bounce, I can see a further move down to its 50 DMA. The pair is now back in a heavy consolidation zone.

CADJPY

CJ looks pretty bullish here on the 4H chart where price broke above a resistance zone. But, the break is still kind of weak, and a clear close above it would be a good sign for the pair. If the 1H has a nice close above this level, I think that would be the start of a continued run to the upside. I traded this pair with a bullish case, and I still feel like we got some room to run here to at least the next top around 88.550. But, that all depends on if price can hold itself at or above this level it's currently hovering on.

GBPCAD

For this pair, I'm kind of mixed because of the price action this week makes it look stronger than CAD from a techincal standpoint. So, in the short term (this and next week) I don't really know where it's going to move. However, the pair likes the 50 DMA for support, it couldn't reach the highs to test a double top around 1.75660, and it also couldn't fall back down to a falling trend line for support. GBPCAD could be showing signs of an early wedge pattern on the 1D.

AUDCAD

I really like these lower lows on the 4H especially after price broke underneath its channel that it rode since June. If price comes up to retest that resistance (trend line and resistance level around .92273, I think that could be a decent short setup here, especially amid the Australian lockdown.

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