Analys från DailyFX
USD/CAD Short Term Levels Ahead of BOC Rate Decision
Talking Points:
– USD/CAD displaying possible bottom picking attempts via SSI
– BOC rate decision the main event risk on the docket. Bank expected to keep rates unchanged.
– Oil link could provide an opportunity following the event
The USD/CAD is under pressure for the fifth consecutive day after falling sharply following Friday’s NFPs and an abysmal US Services ISM report yesterday.
With the Bank of Canada Rate Decision ahead and volatility in Crude Oil prices, the pair remains highly 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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The Bank of Canada Rate Decision is set to hit the wires 12:00 GMT, with the bank expected to keep rates unchanged at 0.5%.
Looking at rates implied probabilities, the market has a slight lean towards easing heading into 2017, but overall outlook sees the BOC remain on hold for the foreseeable future. Indeed, BOC Governor Stephen Poloz suggested the bank will step back from monetary stimulus until Trudeau’s fiscal measures take place.
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 the nation’s trade deficit narrowed more than expected in the last read and exports (which Poloz emphasized as key for the economy’s recovery) were up 3.4%.
Taken together with the fact that Q2 GDP signaled a 0.6% increase in June (mitigating the 1.6% contraction due to the Alberta wildfires), the major headwind for the BOC at the moment appears to be the currency’s appreciation, which might suggest a slightly higher probability of a dovish lean in today’s meeting.
This could open up an opportunity if Oil keeps trading higher today. USD/CAD Crude Oil correlation has reduced lately, with 10-day correlation at -0.12 at the time of writing- hardly impressive, as recent movements in the pair were more a story of US Dollar weakness. If the USD/CAD experiences a knee-jerk spike higher on a dovish Poloz, Canadian Dollar bulls might take advantage of higher prices with rising oil prices to lean on as the correlation starts to kick in again (as it usually does).
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 volatility lower lately according to 20-day ATR measures, like the markets in general in the last months, even though we did see a pickup in activity in the last few days.
In turn this might suggest that the longer term tech level could hold in the short term.
USD/CAD 30-Min Chart (With the GSI Indicator): September 7, 2016
(Click to Enlarge)
The USD/CAD is trading at a support at 1.2837, with GSI calculating slightly higher percentages of past movement to the downside in the short term.
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, and download the Trade Station version here.
Other levels of support may be the area below 1.28, 1.2764 and 1.27.
Levels of resistance might be 1.2860, 1.29, 1.2950 and 1.2980.
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.
We studied over 43 million real trades and found that traders who successfully define risk 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 59.6% of FXCM’s traders are long the USD/CAD at the time of writing, offering a short bias on a contrarian basis.
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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