Analys från DailyFX
USD/CAD Technical Analysis: Risk-Aversion Drops Loonie
Talking Points:
- USD/CAD Technical Strategy: 6-Month Breakout Higher Within 1*ATR (5)
- Trader Sentiment Warns That Evidence Of A Move Higher Could Be Building
- Looking For Clear Short-Term USD/CAD Levels Updating In Real-Time? Check Out GSI
Quick Fundamental Take:
The Canadian Dollar has very little reasons to go bid. Recently, we heard the Bank of Canada note that the risks for inflation had, “tilted somewhat to the downside.” The lower inflation expectations align with the weaker economic data coming from Canada and the potential for a re-emergence of policy divergence, and current account divergence from Canada from other developed economies.
For now, the most notable focus is on USD/CAD and EUR/CAD. Both pairs favor upside given the fundamental and technical development in September. One helpful component of the Canadian Economy has been their exposure to Emerging Markets and how exports were expected to help Canada come out of its economic slump that is shown through the Citi Economic Surprise Index for Canada that is showing its worst rating since January when USD/CAD was trading in the mid-1.4000s.
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As markets await the final week before the Central bank combination of September 21 of the Bank of Japan, Federal Reserve, and Reserve Bank of New Zealand we see a clear shift toward Commodity FX and EMFX selling.
The risk-off tone has weakened the Canadian Dollar across majors, and USD/CAD could soon be trading at 6-month highs if 1.3253 is broken.
Technical Focus:
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The Canadian Dollar has fallen by 1% on Tuesday, but what is more attention-grabbing are the technical developments, in addition to the Fundamental components described above that are behind the move. First, you’ll notice the rising trendline that has supported the price of USD/CAD, which has recently pushed the pair above the Ichimoku Cloud.
The Daily Chart with Ichimoku applied shows what could be a fierce breakout. Currently, the price and momentum (green line) are above the cloud which means the path of least resistance is higher. One level that is standing in the way of USD/CAD upside appears to be the July high of 1.3253. If USD/CAD can see a daily close above 1.3253, we could be well on our way to the 38.2%-61.8% Fibonacci Retracement zone of the January-May decline. This zone stretches from 1.3311 up to 1.3837.
Another component worth mentioning is that the 100-DMA (1.2955) is currently turning higher and supporting price. If the price of USD/CAD can remain above 1.2955, there would be building technical evidence to favor an upside bias while looking for opportunities to buy dips.
Having a Hard Time Trading USD/CAD? This May Be Why
USD/CAD Speculative Sentiment Index as of Tuesday, September 13, 2016
As of mid-day Tuesday, the ratio of long to short positions in the USDCAD stands at -1.61 as 38% of traders are long. Yesterday the ratio was -1.23; 45% of open positions were long. Long positions are 23.2% lower than yesterday and 44.5% below levels seen last week. Short positions are 0.6% higher than yesterday and 43.0% above levels seen last week. Open interest is 10.1% lower than yesterday and 6.7% below its monthly average.
We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders are short gives a signal that the USDCAD may continue higher. The trading crowd has grown further net-short from yesterday but unchanged since last week. The combination of current sentiment and recent changes gives a further bullish trading bias.
Key Levels as of Tuesday, September 13, 2016
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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