Analys från DailyFX
USD/CAD Technical Analysis: Near Support Ahead of BoC
Talking Points:
- USD/CAD Technical Strategy: Upside Remains Favored On Hold of 1.3264
- Crude Oil Price Forecast: 16-Month Highs In Oil Negates Double-Top
- Bank of Canada Rate Announcement May Respond To Weak Export Growth
Quick Fundamental Take:
The Canadian Dollar was able to salvage November on the back of the OPEC accord that saw the first coordinated production cut out of OPEC in eight years. However, the resolute Canadian Dollar may cause a more vocal Bank of Canada on Wednesday when they meet to discuss the economic progress and are expected to hold rates.
While the CAD has traded well against weaker currencies like the JPY in early December, there is still a lot of headwinds facing the loonie. On Tuesday, the Canadian economy recognized a worse than expected export volume in the trade balance that recovered from November’s anomaly.
Having a Hard Time Trading USD/CAD? This May Be Why
Much of the USD/CAD downside has been a combination of the Canadian Dollar benefiting from the DXY pause while participating in the Oil Rally to 16-month highs as a commodity currency. The upside for the Canadian Dollar will likely face many tests hard to pass with the positive US Data like Monday’s Non-Manufacturing ISM and next week’s Federal Reserve Rate announcement that could result in a reshaping of market expectations of the projection of future rate policy.
Any signs that the Bank of Canada will battle the weak export growth with accommodative policy alongside a more hawkish Fed could resume the sluggish trend higher in USD/CAD that has been in place for H2 2016. However, the strong jobs number that Canada showed last Friday could help encourage CAD bulls against weaker currencies if the Bank of Canada remains on hold for now.
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Technical Focus:
D1 USD/USD: Consolidation Above LT Support (100-DMA, Ichimoku Cloud, RSI(14) 40 Line
Chart Created by Tyler Yell, CMT
The Canadian Dollar has strengthened by ~3% over the last month at touching the 50% retracement of the 2016 range. For the time being, the burden of proof is on USD/CAD Bulls as the price sits below Shorter-term resistance like the 50-DMA and H4 Ichimoku Cloud.
However, we’re also sitting above longer-term resistance like the 100-EMA (1.3190), Daily Ichimoku Cloud (1.3230), and Momentum Support of RSI(14) sitting at the 40-level.
The current consolidation has shown little signs of reversing, and we will favor further short-term CAD strength against the USD and other weaker currencies as USD/CAD remains below weekly opening range high of 1.3357 and November 22 low of 1.3378. The longer-term chart shows a polarity zone in effect near 1.3264, which has been pierced but not severely broken. A stronger break of 1.3264 would open up the argument for a move down to 1.3190, which is where we currently find the 100-DMA.
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A breakout above 1.3357/78 would open up Bullish targets of 1.3537 followed by the November 14 high near the 50% retracement of the January-May range at 1.3589. If 1.3589 breaks, we’ll be on the watch of the 61.8% retracement of the same range at 1.3838.
Key Short-Term Levels as of Tuesday, December 5, 2016
T.Y.
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What’s inside:
- EURUSD broke the ‘neckline’ of a bearish ‘head-and-shoulders’ pattern, April trend-line
- Resistance in vicinity of 11825/80 likely to keep a lid on further strength
- Targeting the low to mid-11600s with more selling
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Coming into last week we pointed out the likelihood of finally seeing a resolution of the range EURUSD had been stuck in for the past few weeks, and one of the outcomes we made note of as a possibility was for the triggering of a ’head-and-shoulders’ pattern. Indeed, we saw a break of the ’neckline’ along with a drop below the April trend-line. This led to decent selling before a minor bounce took shape during the latter part of last week.
Looking ahead to next week the euro is set up for further losses as the path of least resistance has turned lower. Looking to a capper on any further strength there is resistance in the 11825-11880 area (old support becomes new resistance). As long as the euro stays below this area a downward bias will remain firmly intact.
Looking lower towards support eyes will be on the August low at 11662 and the 2016 high of 11616, of which the latter just happens to align almost precisely with the measured move target of the ‘head-and-shoulders’ pattern (determined by subtracting the height of the pattern from the neckline).
Bottom line: Shorts look set to have the upperhand as a fresh month gets underway as long as the euro remains capped by resistance. On weakness, we’ll be watching how the euro responds to a drop into support levels.
For a longer-term outlook on EURUSD, check out the just released Q4 Forecast.
EURUSD: Daily
—Written by Paul Robinson, Market Analyst
You can receive Paul’s analysis directly via email bysigning up here.
You can follow Paul on Twitter at@PaulRobinonFX.
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
EURUSD: Retail trader data shows 37.3% of traders are net-long with the ratio of traders short to long at 1.68 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.07831; price has moved 9.6% higher since then. The number of traders net-long is 15.4% lower than yesterday and 16.4% higher from last week, while the number of traders net-short is 0.4% higher than yesterday and 10.5% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
GBPUSD: Retail trader data shows 38.2% of traders are net-long with the ratio of traders short to long at 1.62 to 1. In fact, traders have remained net-short since Sep 05 when GBPUSD traded near 1.29615; price has moved 3.4% higher since then. The number of traders net-long is 0.1% higher than yesterday and 13.4% higher from last week, while the number of traders net-short is 10.6% lower than yesterday and 18.3% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBPUSD price trend may soon reverse lower despite the fact traders remain net-short.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
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