Analys från DailyFX
USD/CAD May Mount Another Breakout Attempt on Further Oil Drop
Talking Points:
– USD/CAD trading around resistance at the 1.3150 level
– US ISM data and Crude Oil Inventories put the pair in focus today
The USD/CAD rebounded yesterday after finding support above the 1.30 handle, and currently trades around potential resistance below the 1.3150 figure.
The pair remained supported even though the US Dollar tumbled, perhaps due to influence of falling Oil prices pressuring its Canadian counterpart.
With the US ISM Non-Manufacturing data and Crude Oil Inventories ahead, the pair is in high focus.
Taking this into consideration, we look to find short term trading opportunities using the Grid Sight Index (GSI) indicator.
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The US ISM Non-Manufacturing July figures are set to hit the wires 14:00 GMT. The diffusion index is expected to slightly down tick to 55.9 from the prior 56.5 print. The ISM numbers tend to have market moving impact, which could by even amplified this time around as the market digests the huge miss to US 2Q GDP estimates this Friday.
Given the fact that the pair staged a significant rebound yesterday despite US Dollar weakness might imply that the USD/CAD could be more vulnerable to upside surprises, that could help ease concerns over the US economy following the GDP report.
The official EIA weekly Crude Oil Inventories numbers seem like a huge event risk today. Economists are expecting a -1363K draw-down coming into today, versus the prior +1671K figure.
Crude Oil and USD/CAD 20-day correlation is sitting at -0.62 while 10-day correlation is at 0.0 at the time of writing. These figures might help shed light on the current dynamic in the pair. On the short end, the pair tumbled on intrinsic US Dollar weakness, but correlation remains strong on the longer outlook.
At the time the pair rebounded yesterday, other majors rallied versus the US Dollar and/or saw only a slight correction, this could mean that focus might now be coming back to Crude Oil prices as a key driver for price.
Taking this into consideration may imply that the USD/CAD could potentially be very vulnerable to any US Dollar strength at the moment, aggregated by further declines in Oil.
USD/CAD 5-Min GSI Chart: August 3, 2016
The USD/CAD is trading at a possible resistance area (see chart below), with GSI calculating even percentage of past movement to either side in the short term. The GSI indicator above calculates the distribution of past event outcomes given certain momentum patterns, and can give you a look at the market in a way that’s never been possible before, analyzing millions of historical prices in real time. 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.
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 reduced levels of volatility (on 14-day ATR study). In turn, this could imply that range bound trading plays might be appropriate. However, a combination of positive US data and weaker oil prices on the Crude Oil figures might set the stage for a possible breakout attempt on Friday’s NFPs.
USD/CAD 30-Min Chart: August 3, 2016
(Click to Enlarge)
The USD/CAD is trading at an area of possible resistance below the 1.3150 level. The pair might need to see a clear move above that level for the US Dollar to really pick up speed here.
Further levels of resistance on a move higher might be interim resistance at 1.3180, the 1.32 handle and a zone around the July high at about 1.3250, which the pair failed to break on the latest attempts.
The significant levels of interest on a move lower could be an area around 1.3080, 1.3050 and a zone above the 1.30 handle, followed by 1.2980 and 1.2950.
When price reaches those levels, short term traders might use the GSI to view how prices reacted in the past given a certain momentum pattern, and see the distribution of historical outcomes in which the price reversed or continued in the same direction. We generally want to see GSI with the historical patterns significantly shifted in one direction, which could potentially be used with a pre-determined bias as well.
A common way to use GSI is to help you fade tops and bottoms, and trade breakouts. That’s why traders may want to use the GSI indicator when price reaches those specific pre-determined levels, and fit a strategy that can offer a proper way to define risk. We studied over 43 million real trades and found that traders who do that were three times more likely to turn a profit. Read more on the “Traits of Successful Traders” research.
Meanwhile, the DailyFX Speculative Sentiment Index (SSI) is showing that about 48.2% of FXCM’s traders are long the USD/CAD at the time of writing. The SSI is mainly used as a contrarian indicator implying a slight long bias.
You can find more info about the DailyFX SSI indicator here
— 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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