Analys från DailyFX
USD/CAD Price Analysis: Significant Trading Risk Ahead of BoC
Can CAD strength continue? Click here to see our latest forecasts to find out what is driving market trends!
Talking Points:
- USD/CAD technical strategy: short with trailing stop moved to 1.3015, not holding above
- USD/CAD has tagged the 1.618% Fib extension ahead of high-risk BoC
- IGCS Highlight: USD/CAD pullback may be in the works
The gasoline in the engine that runs all global markets is expectations. When expectations are shaken, and new ones form, markets move. Speculators or hedges move to price in a new future and volatility is the result of an aggressive pricing in of an asset in the future. On Wednesday, the Bank of Canada will carry a burden of their own making in that a rate hike is priced in at a ~92% probability. That’s a heavy expectation and if they do not meet such expectation or provide a “dovish hike,” you can bet the market will aggressively reprice USD/CAD.
On Monday, the Canadian Dollar is the strongest currency in the G8 on a relative basis. The relative measure is taking a 4-hour chart and filtering 28 currency pairs against the 200-MA to see which currency is above the 200-MA the most. Currently, that honor goes to the Canadian Dollar. For those interested, the weakest currency pair on a relative basis is the Japanese Yen.
The market has reason to price in a 92% probability of a rate hike when Stephen Poloz Co. of the Bank of Canada announces their decision on Wednesday. They’ve said as much by talking about the surprising growth in new areas that has supported the Canadian economy while the rate cuts of yesteryear have “done their job.” However, as a trader, you always want to identify the exit signs of a trade or a technical development. On USD/CAD, my exit door sits on a break above 1.3015.
The level 1.3015 marks the opening range high for the first week of July and second half of 2017. A break above this level would come from either a dovish announcement relative to market expectations (the bar appears low for that) or a no-hike, which would likely bring in aggressive repricing. A break above 1.3015 would also show a strong rebound of a downside price target of 1.2895, the 1.618% Fibonacci expansion target and a move to 1.33 as short USD/CAD traders count their winnings could unfold before the next move lower begins.
The medium-term remains bearish, and a break above 1.3015 would be anticipated to carry little further than 1.3250/33, but the short picture shows that there is a risk in buying CAD ahead of the BoC on Wednesday. Match that technical picture with the sentiment picture below, and you can see that short USD/CAD traders may be walking on thin ice for the moment.
Recommended Reading: Crude Oil Price Forecast: Supply Pressure Adds To Bearish Key Day
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Chart Created by Tyler Yell, CMT
USD/CAD Insight from IG Client Positioning: USD/CAD pullback may be in the works
The sentiment highlight section is designed to help you see how DailyFX utilizes the insights derived from IG Client Sentiment, and how client positioning can lead to trade ideas. If you have any questions on this indicator, you are welcome to reach out to the author of this article with questions at tyell@dailyfx.com.
USDCAD: Retail trader data shows 66.3% of traders are net-long with the ratio of traders long to short at 1.97 to 1. In fact, traders have remained net-long since Jun 07 when USDCAD traded near 1.3481; theprice has moved 4.5% lower since then. The number of traders net-long is 3.8% lower than yesterday and 11.6% lower from last week, while the number of traders net-short is 34.2% higher than yesterday and 41.1% higher from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USDCAD prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current USDCAD price trend may soon reverse higher despite the fact traders remain net-long.(Emphasis mine)
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Written by Tyler Yell, CMT, Currency Analyst Trading Instructor for DailyFX.com
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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.
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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