Analys från DailyFX
USD/CAD Technical Analysis: Overbought RSI May Bring Opportunity
Talking Points:
- USD/CAD Technical Strategy: choppy move higher favored as ST momentum is Bullish
- February marks third straight month of Trade Surplus for Canada, energy helping
- Previous Article: USD/CAD Technical Analysis: Catapulting Higher On BoC Yield Differential
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Despite continual improvements in the Canadian economy, the Canadian Dollar continues to fall to the USD. In the Canadian Dollar’s defense, most currencies have been falling to the USD since the Federal Reserve presidents, and chairwoman Yellen spoke last week to help convince the market that hikes would begin at the March 15 FOMC meeting. Over the last two weeks, the implied probability of an FOMC rate hike has surged from ~33% on February 22 to 98%-implied probability as of Tuesday.
Canada posting its third straight trade surplus was not enough to turn the trend in USD/CAD, which as had short-term momentum decidedly higher. Much of the credit to three straight trade surpluses have gone to energy price stabilization as well as other commodity exports to emerging markets, which have been playing a larger role in Canada’s global trade relationship during the energy crash of 2014/2015.
The momentum of positive data from Canada will be tested for continuation on Friday when February employment data will be released at the same time as US employment data, also known as non-farm payrolls. From the US perspective, the highimplied probability of tightening from the Fed provides a view that risk is becoming asymmetric meaning that bad news would hurt the USD more than the good news would boost USD.
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The charts show a clean move to the top-half of a channel that has frames price action very well. The spot price of 1.3415 sits above the March 6 and 2 low support at 1.3365 and 1.3324 respectively. The resistance in focus in the January 4 high of 1.3457 has a majority of traders attention as the daily RSI(5) sits in overbought territory.
While risks do appear asymmetric on the USD, it is worth noting the S/W relationship at play right now that has USD as the strongest G8 currency on a relative basis when comparing on a 240-minute chart with a 200-DMA filter. The strength of the USD should be provided the benefit of the doubt given the widening rate differentials that could continue to keep buyers jumping in on any dips in USD/CAD.
A pull-back to the Ichimoku cloud as new-found support would likely be a buying opportunity for traders with a focus on a continual move higher toward the January 4 high. The channel above is drawn off the May extremes with internal lines at the 23.6%, 50%, 78.6% point of the initial range with the same slope as the channel. The top of the prior range is the December 28 high of 1.3598, which would also be the beginning of the top quartile in the price range. The top quartile will be an appropriate focus if the ST momentum remains bullish and 2yr US/CA yield differential remain wide. The top of the channel comes in near 1.3750.
A reversal below the stellar support of 1.3150 is needed to turn the technical view from neutral to bearish from my standpoint.
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D1 USD/CAD Chart: Overbought RSI May Bring Buying Opportunity On Pullback
Chart Created by Tyler Yell, CMT
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Shorter-Term USD/CAD Technical Levels for Tuesday, March 7, 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 of trading.
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.
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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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