With Oil price making a new short-term low at 46.45$ one would expect USDCAD to be above its recent high at 1.2965, instead price is pressured by sellers and it lags behind showing that the main trend remain bearish and this is only a corrective bounce.
As one can see above in the Oil chart, despite the new low the oscillators are diverging. This is just a warning for Oil bears to be cautious. Additionally the form of the decline from 48.75$ is far from impulsive. This implies that the up trend is not complete. So Oil has a lot of chances of making a bullish reversal and a new high. This affects USDCAD negatively.
As I had pointed out earlier through my twitter account USDCAD may be following the above fractal map. Need to be patient and a break below 1.2855 will increase the chances of this bearish scenario playing out.
In the final chart above I want to show you where we currently are trading. Price has stopped its rise at the 38% Fibonacci retracement of the decline from 1.32 and at the same time right below the broken triangle pattern. This is an important back test. Usually after a breakdown of a triangle we see a back test and a rejection. A rejection here will increase a lot the chances of the bearish scenario playing out.
I’m bearish and short. Above 1.2965 things will not be good for bears…at least for the short-term as we could see a 100 pip bounce. In the longer-term as long as price is below 1.32 I can see even a decline towards 1.20-1.15.