Canadian Dollar: USD/CAD (CAD=X) faces heavy selling pressure as oil plunged to levels not seen since 2003
Yesterday, Canadian dollar faced heavy selling pressure as oil plunged to levels not seen since 2003. Today, oil is getting support from bargain hunters as well as from the U.S. government, which decided to purchase 30 million barrels of oil for strategic reserve.
On the fundamental front, Canada reported that New Housing Price Index increased 0.4% month-over-month and 0.6% year-over-year. Analysts were calling for the index to be little changed, so this was a positive surprise which highlighted the strength of the housing market before the real impacts of the coronavirus started to emerge.
The U.S. today reported that inital claims increased to 281,000 compared to expectations of an increase of 220,000. This means that coronavirus-related measures are already starting to impact real life. I expect that the initial claims number which will be reported next week will look much worse.
Another fundamental index which has already suffered from the coronavirus situation was the Philadelphia Fed Manufacturing Index, which showed a negative reading of -12.7 compared to consensus of +10.
The fundamental data keeps getting worse, and I can safely say that we haven’t yet seen the true damage done by the virus containment measures. In the current situation, the bad data is positive for the U.S. dollar which is the main safe haven asset in the world right now.
However, the USD/CAD dynamics are also impacted by the changes in oil prices. Today’s rebound in oil and the corresponding strength in the Canadian dollar show that both oil and the Canadian currency got too stretched to the downside, and bargain hunters were ready to step in.
Overall, the bias in prices is: Upwards.
Note: this chart shows extraordinary price action to the upside.
By the way, prices are vulnerable to a correction towards 1.36.
The projected upper bound is: 1.47.
The projected lower bound is: 1.42.
The projected closing price is: 1.45.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 8 white candles and 2 black candles for a net of 6 white candles. During the past 50 bars, there have been 35 white candles and 15 black candles for a net of 20 white 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 81.1327. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a sell 14 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 81.43. This is where it usually tops. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 28 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 127.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 10 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 16 period(s) ago.
Rex Takasugi – TD Profile
FOREX CAD= closed down -0.007 at 1.444. Volume was 77% below average (consolidating) and Bollinger Bands were 412% wider than normal.
Open High Low Close Volume___
1.451 1.454 1.444 1.444 13,742
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 1.41 1.34 1.32
Volatility: 19 11 7
Volume: 108,739 69,532 65,428
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 9.0% above its 200-period moving average and is in an upward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect very strong flows of volume into CAD= (bullish). Our trend forecasting oscillators are currently bullish on CAD= and have had this outlook for the last 42 periods. Our momentum oscillator is currently indicating that CAD= is currently in an overbought condition.