Analys från DailyFX
USD/CAD Technical Analysis: Oil Instability Favors Trend Resumption
Talking Points:
– USD/CAD Technical Strategy: Upside Remains Favored Despite Bounce Off 50% Retracement
– Crude Oil Price Forecast: Crumbling OPEC Deal Agitates Oil Market
– Slew of North American Oil economic data makes it tough for CAD to gain ground
Quick Fundamental Take:
The Canadian Economy continues to do little favors for those long the Canadian Dollar in the current environment. While the CAD has traded well against weaker currencies like the EUR JPY in November, there is still very little hope in the near-term outside of an OPEC accord and consolidation of leading currencies right now (GBP USD) for CAD to triumph.
On Tuesday, the Canadian economy recognized a worse than expected, albeit improved trade balance or current account of 18.3bn in Q3. Given persistent USD strength as seen via the DXY that was influenced by Tuesday’s strong real GDP, the Canadian Dollar continues to back-pedal against the greenback.
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The fundamental backdrop seems to favor more of the same, which is gradual CAD weakness against the USD as Oil looks unstable on a doubtful OPEC deal, homeland economic data is showing exports are not delivering the boost hoped for, and USD strength looks ready to persist. The rest of the week is packed with economic data for Canada with GDP on Wednesday and Employment numbers on Friday, which could increase the volatility of USD/CAD.
Having a Hard Time Trading USD/CAD? This May Be Why
Technical Focus:
D1 USDCAD: Clean Corrective Channel Within Broader Uptrend
Chart Created by Tyler Yell, CMT
The Canadian Dollar has lost ground on Tuesday morning but continues to trade in a corrective channel after pushing off significant support from last week against the US Dollar. Namely, the 50% Fibonacci Retracement of the 2016 range at 1.3575.
The weakness displayed in the Candian Dollar has aligned with the trend shift that we’ve been focusing on since the price broke above the Ichimoku Cloud and was followed by the momentum line. We continue to favor upside based on both the charts and fundamental story explained above.
An additional component to favor the upside is the persistence of RSI(5) on the daily chart of USD/CAD above the 50 level. One way to utilize RSI is to divide the oscillator in half. A persistent move above the 50-point market or below the 50-point mark can provide you with a clear bullish or bearish bias respectively.
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As the price remains above the 50-point mark on RSI(5) and Ichimoku Cloud, the path of least resistance remains higher in our view. Also, we could be paving the way for an aggressive rise as we move from a leading diagonal to an impulsive wave ‘iii’ of ‘C’ in Elliott Wave terms. The leading diagonal view has been encouraged by the recent break to the 50% retracement that has been followed by what appears to be a corrective channel.
The recent price channel is not exciting, but it can set us up to be on the lookout for a breakout higher. The bias will remain as long as we stay above 1.2364, the post-election low, we’ll look to confirm the upside pressure on a break above the bearish channel drawn off the 1.3589 high on November 14.
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The current upside target is the November 14 high near the 50% retracement of the January-May range at 1.3589. If 1.3589 breaks, we’ll be on the watch of the 61.8% retracement of the same range at 1.3838.
A few of the support levels that would need to break to change the tune from Bullish to Neutral is 1.3312, the 38.2% Fibonacci Retracement of the Jan-May range followed by the November 9 low of 1.3264 that was mentioned above.
Late November tends to provide thin trading, but over the past few years, USD/CAD has accelerated higher over December January. We’ll keep a watch on this trend to continue as the charts favor further upside above 1.3264.
Key Short-Term Levels as of Tuesday, November 28, 2016
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
You can receive Paul’s analysis directly via email bysigning up here.
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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