Canadian Dollar: USD/CAD (CAD=X) Bulls Seem Deceptive After Trendline Breakdown

Canadian Dollar: USD/CAD (CAD=X) Bulls Seem Deceptive After Trendline Breakdown

Canadian Dollar: USD/CAD (CAD=X) Bulls Seem Deceptive After Trendline Breakdown

USDCAD closed out 2019 on the defensive and made a crucial weekly/monthly close below long-term support zone of (1.2950 – 1.3165) drawn off the 2015-17 support zone for the USD on the longer run charts.

Although the pair has been attempting show some minor rallies from last 2-3 days, it is unwise to buck the major trend, interim rallies in the minor trend may be deceptive, bulls unlikely to extend upswings as both leading & lagging indicators indecisive.

On a broader perspective, the major uptrend that was through uptrend line so far, ever since the bearish engulfing candle has occurred at 1.3123 level in January’19 (see circular area) the trend appears to be vulnerable.

For now, the bears have managed to breach trend line support to signal weakness as both momentum oscillators indicative of overbought pressures, current price slides below 7&21-EMAs.

We think late 2019 price signals overall are tipping the technical outlook for the USD clearly to the downside. 

1) The USD met steady resistance in the mid-1.33s and the break under the H2 range base suggests 300-350bps of downside potential potentially from the 1.3050 or so zone. 

2) Q4 overall was bearish for the USD (“engulfing” candle on the quarterly chart. 

3) Six weeks of consecutive net losses for the USD have established a strong downtrend on the intraday, daily and weekly oscillators. This provides for a high conviction call for the USD trend lower to extend in the near to medium term and implies to us that scope for counter-trend USD corrections is limited (likely to the low/mid 1.30s). 

Therefore, overall we continue to believe that further downward pressure on the USD will emerge as 2020 develops. Key resistance now is 1.3165/70. We target a drop to 1.28 (at least) in the months to come.

At spot reference: 1.3052 levels (while articulating), we recommend directional hedges that comprised of longs in EURUSD futures contracts of January’20 delivery, simultaneously, shorts in futures of March’20 delivery for arresting bearish risks in the major trend. The short leg is likely to hedge potential slumps and the momentary upside risks can be arrested by the long leg. Thereby, one could be able to directionally position in their FX exposures on hedging grounds.

Technical Indicators

Overall, the bias in prices is: Sideways.

By the way, prices are vulnerable to a correction towards 1.31.

The projected upper bound is: 1.31.

The projected lower bound is: 1.30.

The projected closing price is: 1.31.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 22 white candles and 27 black candles for a net of 5 black candles.

Three white candles occurred in the last three days. Although these candles were not big enough to create three white soldiers, the steady upward pattern is bullish.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 74.6877. This is not an overbought or oversold reading. The last signal was a buy 4 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 44.06. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 2 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 7. This is not a topping or bottoming area. The last signal was a buy 2 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 0 period(s) ago.

Rex Takasugi – TD Profile

FOREX CAD= closed up 0.002 at 1.306. Volume was 3% below average (neutral) and Bollinger Bands were 22% wider than normal.

Open     High      Low     Close     Volume___
1.304 1.310 1.302 1.306 58,114
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 1.30 1.32 1.32
Volatility: 5 5 6
Volume: 49,693 52,587 69,612

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

FOREX CAD= is currently 1.4% below its 200-period moving average and is in an downward trend. Volatility is low as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of CAD= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on CAD= and have had this outlook for the last 19 periods.

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