Analys från DailyFX
USD/CAD Technical Analysis: Approaching Support Before BoC
Talking Points:
- USD/CAD Technical Strategy: break below trendline puts burden of proof on Bulls
- USD/CAD at Risk for Further Losses Sub-1.33
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Next week brings the Bank of Canada rate announcement, which will be in focus for traders trying to discern how stern Stephen Poloz will be on Monetary Policy going forward. Much of the strength in the Canadian Dollar has been attributed to a positive shift in economic data combined with a less dovish Bank of Canada.
As the macro opening range of 2017 of 2017 finishes up, it has been highlighted by commodity FX strength vs. USD. As of Friday, we see the Australian Dollar and Canadian Dollar as the two strongest currencies in G10FX with NZD not far behind.
Commodities are seen as an inflation hedge, and the surprising weakness in USD has provided a further boost in some commodities and currencies whose Central Banks are not expected to engage in further easing. The question for most traders has become whether the USD still has more room to fall, and if commodities and the economies who do well when they appreciate could also continue to benefit well into H1 2017.
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The momentum to push lower in USD/CAD is at odds with a pattern on the chart that has included a strong bounce higher from the 200-dma (1.3098) and deep retracements in the choppy move higher. While some would argue that momentum may be bottoming out, it’s equally unsure whether or not the subsequent upside momentum or retracement to the mean will be worth a countertrend trade. If the price subsequently breaks below the perceived pin-bar on Thursday, it is likely an appropriate view that the down-move could continue to extend and surprise many.
Given the current environment, we would argue that the environment of strong commodity FX, surprisingly weak USD, and the Bank of Canada meeting next week should hold off Bulls until a close above 1.3296 (Wednesday’s high Ichimoku Cloud) surfaces. Until then, we’ll focus on a possible push through Thursday’s low of 1.3029 to target the twin lows of September and August at 1.2822 and 1.2763 respectively.
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D1 USD/USD Chart: Trading Well In a Falling Channel. Now Faces 200-DMA Support
Chart Created by Tyler Yell, CMT
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Key Short-Term Levels as of Wednesday, January 13, 2017
For those interested in shorter-term levels of focus than the ones above, these levels signal important potential pivot levels over the next 48-hours.
T.Y.
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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.
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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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