Analys från DailyFX
USD/CAD Technical Analysis: Bearish Evidence Continues To Build
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Talking Points:
- USD/CAD Technical Strategy: Selling the Rip Remains Favored Play on USD Weakness
- Trader Sentiment Favors Further CAD Strength
- LT 38.2% Fibonacci Retracement Line at 1.2750 In Focus
The Canadian Dollar could continue to surprise FX participants in Q2. On one hand, the US Dollar has had a very difficult time maintaining a bid, on the other hand, and likely correlated, commodities emerging markets are making a significant comeback. Lastly, from a mean median return standpoint, USD/CAD tends to show its largest losses (biggest CAD gains) in April. Therefore, if these trends continue, we could be in the midst of a larger decline despite the recent losses.
New Fundamental Support Canadian Dollar Strength
Emerging Market strength has been the surprise story of 2016, and it may be just gathering steam. Emerging Markets have been on a decline really since 2011/2, and it’s possible that the late January low was a significant low that could be reminiscent of the March 9 low in US Equities in 2009.
Of course, it’s still too early to pull the corks on the champagne bottles to celebrate EMs, but the recent strength is very helpful for Canada who exports a lot of commodities to emerging markets. One sign that’s too impressive to ignore is the Markit Emerging Markets Composite PMI (Seasonally Adjusted) has recently hit 50.6, which shows that as a composite, Emerging Markets are in expansion mode. If this expansion in Emerging Markets continues, it could be quite the windfall for the Canadian Dollar.
USD/CAD Chart Shows A Trend Not Worth Fighting
Key Support Levels from Here (Visual Map Below)
There is a strong zone of resistance between the Weekly R1 R2 with the late March high and the 200-DMA (which is still rising) at 1.3372. The current channel that has framed price well, and that is drawn off a momentum peak of the move higher favors limited upside and a focus on new yearly lows toward a key support zone.
The key support zone combines not only the channel support but additionally the October pivot at 1.2835, but also the 38.2% Fibonacci Retracement level of the 2012-2016 range at 1.2757. If a strong trend is at play, we could utilize these levels as targets while not being surprised if we blow through them depending on what happens with the US Dollar or WTI Crude Oil.
Canadian Dollar Rally Looks Steady per Sentiment
When looking at sentiment, crowd sentiment has moved positive providing favor for more downside, and this trend appears to be stabilizing. We use our Speculative Sentiment Index as a contrarian indicator to price action, and the fact that the majority of traders are net-long at a bull: bear of 1.27 as 57% of traders are long means that a bearish USD/CAD signal is currently at play. This signal has been working itself out since late January. Now that the price has broken well-below the 200-dma, we’re now staring at the October low and the long-term 38.2% retracement level. A break below these new key support metrics and a move further into positive territory on the SSI would favor further downside towards downside targets mentioned above.
USD/CAD Speculative Sentiment Index as of 4/06/2016
Combining the technical picture above, with the sentiment picture, and the Intermarket analysis support further warns of more CAD gains ahead.
Key Levels As Of Wednesday, April 06, 2016
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T.Y.
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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