Analys från DailyFX
USD/CAD in Focus Ahead of Canada GDP and US PCE
Talking Points:
– USD/CAD finding support below 1.31 after Crude Oil prices surged
– US PCE and Canada’s GDP numbers are in focus ahead
– 200-day moving average, key resistance zone above 1.32 still a major hurdle for USD/CAD bulls
The USD/CAD found some support below the 1.31 figure after the pair declined sharply when OPEC surprised the market by announcing outlines for a production cut.
Looking ahead, Canada GDP and US PCE headline the economic docket but “Fed-speak” and Baker Hughes are also in focus.
Against this backdrop we will form our outlook and look to find short term trading opportunities using different tools such as the Grid Sight Index (GSI) indicator.
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Canada’s Gross Domestic Product (GDP) report is expected to show GDP rose by an annualized 1.0%, versus the prior 1.1% print.
In their last policy press release, the BOC said that they still project a substantial rebound in the second half of this year after 2Q GDP was pulled down by the Alberta wildfires in May and by a disappointing drop in exports.
The market apparently interpreted the release as leaning slightly to the dovish side on a potential weaker outlook for inflation.
Indeed, the Canadian economy is recovering from the oil shock and a collapse in exports, which brought on a record trade gap for the country, but a positive indication for better than expected GDP and stronger exports (which Poloz emphasized as key for the economy’s recovery) could prove supportive for the Loonie.
US August PCE is on tap at the same time, and the Fed’s favored inflation gauge is set to print 1.7% for the core year-on-year figure, higher than the prior 1.6% print.
A significant deviation from expectations might be required to push Fed rate hike bets higher as it seems the market is displaying a lack of motivation and skepticism about the Fed actually hiking in December.
“Fed-speak” is also in focus today, with scheduled remarks by Kaplan. Traders should be aware of the speech, but if the recent history is an indication, the market appears to be content with the current probabilities for a December hike around 52% (based on Fed fund futures).
The Baker Hughes rig count is also on tap. Signs of increasing demand on more drilling activity could support the recent move higher in Crude Oil prices, which seemed to have been caused by the OPEC announcement.
The USD/CAD traded sharply lower on that news, but has since found some support below 1.31 as stocks traded lower on Deutche Bank concerns, while Crude Oil prices edged lower into today.
Continued risk aversion and Crude Oil weakness could prove supportive for the US Dollar, but the 200-day moving average and a key resistance zone above 1.32 still pose major hurdle for USD/CAD bulls.
USD/CAD Technical Levels:
Click here for the DailyFX Support Resistance tool
We use volatility measures as a way to better fit our strategy to market conditions. The USD/CAD is seeing a slight pickup in implied volatility measures and 20-day ATR readings are edging higher as well.
In turn, this may imply that the breakout type of plays might be appropriate in the lower time frames, but it seems like a clear catalyst may need to present itself to see the pair clear the longer term resistance zone above 1.32.
USD/CAD 30-Min Chart: September 30, 2016
(Click to Enlarge)
The USD/CAD is reacting nicely from a resistance area below 1.32.
Other resistance levels to watch in the short term might be the area above 1.3250.
Levels of support may be found at 1.3150, 1.3100, 1.3060 and 1.30.
In the short term, GSI is showing similar momentum pattern indeed continued to the downside more often than not.
The GSI indicator above calculates the distribution of past event outcomes given certain momentum patterns. By matching events in the past, GSI describes how often the price moved in a certain direction.
You can learn more about the GSI here.
We generally want to see GSI with the historical patterns significantly shifted in one direction, which alongside a pre-determined bias and other technical tools could provide a solid trading idea that offer a proper way to define risk.
— Written by Oded Shimoni, Junior Currency Analyst for DailyFX.com
To contact Oded Shimoni, e-mail oshimoni@dailyfx.com
Follow him on Twitter at @OdedShimoni
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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