Canadian Dollar: USD/CAD (CAD=X) Eyes FOMC Minutes & Canadian CPI Feb 19, 2020 8:30 AM +10:00 Rich Dvorak, Junior Analyst
USD price action has risen an impressive 3.2% year-to-date according to performance in the US Dollar Index. The astounding ascent recorded by the US Dollar over the last several trading sessions has pushed the DXY Index toward the 100.00 price level and to its highest level since October last year.
Dominance exhibited by the US Dollar is owed in part to traders seeking safe-haven currencies as the novel coronavirus outbreak plagues market sentiment and risk appetite. This fundamental theme has provided a positive tailwind to spot USD/CAD price action considering the correlation between the Canadian Dollar and oil.
That said, outlook for USD/CAD over the short-term likely hinges largely on upcoming releases of FOMC minutes and Canadian CPI data, which are due Wednesday, February 19 at 19:00 GMT and 13:30 GMT respectively.
Scheduled event risk surrounding USD/CAD has steered its overnight implied volatility reading to 4.9%, which is above its 20-day average of 4.2%. The uptick in expected currency volatility is observable across other US Dollar currency pairs like EUR/USD which just plunged to its weakest level since April 2017.
Aside from coronavirus fallout, USD price action has also risen significantly on the back of robust US economic data such as monthly nonfarm payrolls. Resilience of the US economy has afforded the FOMC with flexibility to shift away from its dovish posturing last year to a more neutral stance, which has exacerbated US Dollar strength.
As such, the US Dollar has potential to extend its rally considering the likelihood that the upcoming release of FOMC minutes underscore firming monetary policy outlook from the Federal Reserve.
If the latest FOMC minutes reiterate a less-dovish Fed, corresponding strength in the US Dollar might be felt by spot USD/CAD in particular if Canadian CPI and other key inflation indicators tracked by the BoC cross the wires below consensus estimates earlier during Wednesday’s trading session.
Technical Indicators
Overall, the bias in prices is: Sideways.
By the way, prices are vulnerable to a correction towards 1.32.
The projected upper bound is: 1.33.
The projected lower bound is: 1.31.
The projected closing price is: 1.32.
Candlesticks
A black body occurred (because prices closed lower 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 28 white candles and 22 black candles for a net of 6 white candles.
An engulfing bearish line occurred (where a black candle’s real body completely contains the previous white candle’s real body). The engulfing bearish pattern is bearish during an uptrend (which appears to be the case with FOREX CAD=). It then signifies that the momentum may be shifting from the bulls to the bears.
If the engulfing bearish pattern occurs during a downtrend, it may be a last engulfing bottom which indicates a bullish reversal. The test to see if this is the case is if the next candle closes above the bottom the current (black) candle’s real body.
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 26.4713. This is not an overbought or oversold reading. The last signal was a sell 6 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 52.91. 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 sell 6 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 -103.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 6 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 sell 3 period(s) ago.
Rex Takasugi – TD Profile
FOREX CAD= closed down -0.003 at 1.323. Volume was 12% below average (neutral) and Bollinger Bands were 19% narrower than normal.
Open High Low Close Volume___
1.326 1.326 1.321 1.323 47,873
Technical Outlook
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 1.33 1.31 1.32
Volatility: 3 4 5
Volume: 48,172 48,708 64,268
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 0.1% above its 200-period moving average and is in an upward trend. Volatility is relatively normal 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 bullish on CAD= and have had this outlook for the last 20 periods.
