Canadian Dollar: USD/CAD (CAD=X) Coronavirus dominates headlines and hampers risk appetite
The Canadian dollar inched lower overnight, continuing the trend that began following the Bank of Canada monetary policy meeting of January 22. That meeting is not entirely to blame for the Canadian dollar weakness, although it bears the bulk of the responsibility. The Bank of Canada’s poor communication skills had set the market up, making investors believe BoC monetary policy would remain steady.
The BoC monetary policy statement of December warned that the major risk to its outlook was rising trade tensions. Those tensions disappeared when the U.S. and China signed the phase-one trade agreement on January 15. That led analysts to suggest the BoC statement would lean toward being neutrally hawkish. It wasn’t. BoC Governor Stephen Poloz caught markets offside when he issued a dovish policy statement.
Then things went pear-shaped. The Wuhan coronavirus outbreak spooked traders world-wide and led to widespread demand for safe-haven currencies while crushing oil prices. The Canadian dollar accelerated lower and continued to inch lower overnight. USD/CAD closed at $1.3189 and touched $1.3203 in early Toronto trading today.
Chinese markets remained closed for Lunar New Year holidays which continued to hurt FX liquidity in Asia. Asia equity indices followed the lead of Wall Street and dropped, closing with losses. That trend wasn’t observed in Europe, where bourses are trading mixed to flat.
The British pound underperformed its major G-10 peers, falling from 1.3064 in Asia to 1.3006 in Toronto trading. GBP/USD is under pressure ahead of Thursday’s Bank of England policy meeting. Traders are undecided about a rate cut, suggesting volatility will be high when the statement is released. A rate cut may lead to a GBP/USD plunge to $1.2830. If rates are left unchanged, GBP/USD may rally to $1.3150. Weaker than expected U.K. Distributive Trades survey data also weighed on prices today.
EUR/USD was stagnant in Asia, but punched through its overnight low in early Toronto trading to touch $1.1003. The European Central Bank’s dovish outlook is weighing on prices, as are bearish technicals that are looking for a test of support at $1.0960.
The Japanese yen and Swiss franc are supported by safe-haven demand. Yen gains are getting an added boost from soft U.S. Treasury yields. The loonie is undermined by selling of CAD/CHF and CAD/JPY.
The Australian and New Zealand dollars, like the Canadian dollar, are victims of the coronavirus scare. AUD/USD has plunged from $0.7020 at the beginning of the month to $0.6738 overnight. The Australian dollar plunge is exacerbated by fears that the Reserve Bank of Australia may cut interest rates again. Traders are also concerned that the coronavirus will stifle China’s economic growth and lead to lower demand for Australia exports.
The Canadian dollar will continue to track broad U.S. dollar moves. The greenback could add to its gains this morning if today’s U.S. Durable Goods Orders data is higher than forecast.
Overall, the bias in prices is: Sideways.
The projected upper bound is: 1.33.
The projected lower bound is: 1.31.
The projected closing price is: 1.32.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 23 white candles and 27 black candles for a net of 4 black candles.
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.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 83.7501. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a buy 17 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 59.96. 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 15 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 140.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a buy 15 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 13 period(s) ago.
Rex Takasugi – TD Profile
FOREX CAD= closed down -0.003 at 1.316. Volume was 6% below average (neutral) and Bollinger Bands were 3% wider than normal.
Open High Low Close Volume___
1.319 1.321 1.316 1.316 53,410
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 1.31 1.31 1.32
Volatility: 4 5 5
Volume: 50,584 47,187 66,799
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.
FOREX CAD= is currently 0.5% below its 200-period moving average and is in an upward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future. Our volume indicators reflect volume flowing into and out of CAD= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on CAD= and have had this outlook for the last 4 periods.
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