Analys från DailyFX
USD/CAD Price Breaks 1.3000 On BoC Hawkish Tone and Oil Price Rebound
Can CAD strength continue? Click here to see our forecastand find out what is driving market trends!
Highlights:
- USD/CAD technical strategy: short with trailing stop moved to 1.3147
- USD/CAD approaching new 2017 lows (1.2970 is current low) showing CAD strength
- Previous Technical Note: USD/CAD Technical Analysis: Basing or Retracing? That is the Question
The price of commodities like crude oil is turning aggressively higher to end the month, quarter and first half of 2017 to the benefit of Canadian Dollar longs. This week, in Sintra, Portugal we heard from Bank of Canada governor, Stephen Poloz who has encouraged markets to anticipate a BoC rate hike later this year as central bankers the world over appear to be changing their tone on forward guidance. Add to the positive tone from Poloz and the rebound in the price of crude oil, which could run higher sets up an environment that favors selling pull-backs in the pair now that the price has broken below the 13-month channel.
Recommended Reading: Crude Oil Price Forecast: How a WTI Bounce Could Travel Fast
Another helpful component to the strong Canadian Dollar is a weak USD. The Dollar index is working on its fourth monthly loss, which is the most since early 2011 when the Fed had just embarked upon QE2. The market appears unconvinced that the Fed’s ambitious hiking cycle to 3% by the end of 2019 will be met, and the weakening USD looks to be an erosion of the first-mover advantage as the Fed was the first central bank to hike helping to boost USD. Friday will provide more economic data, which if encouraging, would likely further propel the chances of a July BoC hike that would keep USD/CAD strong. The BoC rate announcement is July 12.
When looking at the chart, the highlight is the breakdown below the corrective channel from May 2016 from 1.2460. If we are embarking on a new round of Canadian Dollar strength, we may find ourselves revisiting that level and lower as we approach 2018. The price break of 1.3000 is encouraging, and short-term resistance could be seen at 1.3147, which is a short-term downtrend peak on the recent move lower. A hold below this level will be expected to eventually take us to new 2017 lows (currently at 1.2970) and toward a downward 161.8% Fibonacci extension of 1.2895. Strengthening in crude oil would likely accompany such a move. A move above 1.3147 would take me out of the trade and shift me to neutral, where I’d reassess and look for a better tactical entry.
Click here to read a USD/CAD Analyst Pick: Bearish USD/CAD on BoC’s Hawkish Surprise Fed’s Hawkishness In Doubt
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Chart Created by Tyler Yell, CMT
USD/CAD Insight from IG Client Positioning: Drop in retail shorts favor breakdown continuation
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 74.2% of traders are net-long with the ratio of traders long to short at 2.88 to 1. In fact, traders have remained net-long since Jun 07 when USDCAD traded near 1.34768; price has moved 3.5% lower since then. The percentage of traders net-long is now its highest since Jan 25 when USDCAD traded near 1.30674. The number of traders net-long is 25.4% higher than yesterday and 21.1% higher from last week, while the number of traders net-short is 23.3% lower than yesterday and 39.7% lower 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. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger USDCAD-bearish contrarian trading bias.(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
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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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