Canadian Dollar: USD/CAD (CAD=X) follows gains versus big dollar, ignores $3+ drop in crude prices
The CAD is modestly firmer versus the USD but gains remain light relative to the AUD and NZD on the day—AUDCAD is trading at its highest level
since the start of the year.
We are bullish on the cross and look for gains to extend towards 0.9150. Crude oil prices have slumped again, with NYMEX WTI trading just above $14, curbing CAD gains.
Encouragingly for the CAD, however, gains in stocks are driving volatility lower; the VIX index has moved below 40 to reach its lowest level since early March.
We expect the CAD will continue to move to the beat of risk appetite to a large extent but weak crude prices—which are likely to persist for some weeks at least—will limit scope for gains.
Bloomberg reports that the shortlist of candidates to replace Gov. Poloz (who steps down on June 2nd) numbers two people, one of which is Senior Deputy Governor Wilkins. The other candidate’s name “has yet to emerge in public”, according to the report.
Shayne Heffernan Trade Idea
“I believe the short-term outlook for the CAD is neutral/bearish—the USD has held above 1.40 since the middle of the month but the USD is edging closer to a real test of short term trend and (40-day) moving average support after failing to make more progress above the upper 1.41/low 1.42 range. We note short term price action also suggests a minor Head & Shoulders top may be developing, whose neckline falls right on the 1.40 line now—key support ahead of a move back to the mid 1.37s. Key resistance is 1.4130 on the short term chart.” Shayne Heffernan PhD in Economics
Why This Matters
The Canadian dollar strengthened against its U.S. counterpart on Monday as improved investor sentiment on news that more countries were looking to ease coronavirus-related lockdowns countered a large drop in crude oil prices.
Countries from Italy to New Zealand have announced the easing of lockdown restrictions and the Bank of Japan said it was expanding its stimulus program, helping to boost global stock markets.
Global risk sentiment is getting a boost to start the week as traders focus on continued talk of plans to slowly reopen economies around the world,
Canada runs a current account deficit and is a major exporter of commodities, including oil, so the loonie tends to be sensitive to the global flow of trade and capital.
Overall, the bias in prices is: Upwards.
The projected upper bound is: 1.44.
The projected lower bound is: 1.37.
The projected closing price is: 1.41.
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 27 white candles and 23 black candles for a net of 4 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 25.8686. This is not an overbought or oversold reading. The last signal was a buy 9 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 51.36. 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 24 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 -1. This is not a topping or bottoming area. The last signal was a sell 4 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 sell 1 period(s) ago.
Rex Takasugi – TD Profile
FOREX CAD= closed up 0.003 at 1.406. Volume was 51% below average (consolidating) and Bollinger Bands were 31% narrower than normal.
Open High Low Close Volume 1.403 1.407 1.401 1.406 40,435
Technical Outlook Short Term: Neutral Intermediate Term: Bearish Long Term: Bullish
Moving Averages: 10-period 50-period 200-period Close: 1.41 1.39 1.34 Volatility: 14 16 9 Volume: 106,513 107,970 72,482
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 5.1% above its 200-period moving average and is in an downward 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 bearish on CAD= and have had this outlook for the last 11 periods.
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