Analys från DailyFX
USD/CAD Technical Analysis: Consolidation Could Precede Big Move
Talking Points:
- USD/CAD Technical Strategy: consolidation above trendline support not expected to hold
- Prior Post: USD/CAD Technical Analysis: Entering Into A Pivotal Zone
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The Canadian Dollar is strengthening without much help from Crude Oil, which looks to have stretched positioning not seen since 2014. Much of the strength attributed to the Canadian Dollar has been two-fold. First, the Bank of Canada has come out since their last Rate Announcement as decidedly less dovish (relatively hawkish) than anticipated, which helps communicate that the economy would have to begin struggling more than anticipated for the Bank of Canada to change course and move to a more dovish approach.
Second, the Canadian economy is catching some tail wind from growth expectations from the United States under perceived Fiscal Stimulus from President-elect Trump who takes office on January 20 and the price of Crude Oil stabilizing near $50. The low-$60/bbl range has been a compelling Wall Street target and a move to this level would likely keep the Canadian Dollar firm across the board.
As of Tuesday, January 10, 2017, the Canadian Dollar is the strongest currency in the G10 on a relative basis thanks to the combination of the two measures above and is remaining strong against notably weaker currencies like GBP, NZD, and the Japanese Yen.
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Economic data for the Canadian economy is rather light per the DailyFX Economic Calendar. Canadian Housing Starts did surpass expectations on Tuesday, but the data is seen as second-tier compared to the major themes discussed above.
Watching the chart below, we are starting to face major technical zones worth watching. First, while the Canadian Dollar is the strongest relative currency on an H4-basis, the price is consolidating above a Trendline drawn from the May low.
Given the preference of momentum continuation, until an exogenous shock displaces a very strong or weak currency, we’ll be on the watch for a move below this Trendline. Below the Trendline sites the 200-day moving average at 1.3097, which provided a strong bounce in mid-December. If the price cuts through the 200-DMA, traders would be right to keep an eye on a move to the 1.272% Fibonacci expansion of the late-December move at 1.2939. Below this soft-Fibonacci target is a confluence of Fibonacci a prior price pivot of the August low at 1.2759, and if price breaks below there, many traders may become persuaded of a retest of the May low of 1.2460.
While momentum favors USD/CAD downside, the price is currently trading just below the base of the daily Ichimoku Cloud that has acted as flexible support in the move higher over the prior months. Additionally, from an Ichimoku perspective, the momentum or lagging line has yet to break below the cloud, which is typically one of the strongest indications of a confirmed reversal.
A break above the Ichimoku cloud near 1.3350 could indicate that the Canadian Dollars tenure as the strongest G10 currency has run its course. However, we’ll favor momentum continuation for now until proven wrong.
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Multi-Month H4 USD/USD Chart: Testing Multiple Forms of Support
Chart Created by Tyler Yell, CMT
Key Short-Term Levels as of Wednesday, January 10, 2017
For those interested in shorter-term levels of focus than the ones above, these levels signal important potential pivot levels over the next 48-hours.
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
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You can follow Paul on Twitter at@PaulRobinonFX.
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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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