Canadian Dollar: USD/CAD (CAD=X) on the Rebound

Canadian Dollar: USD/CAD (CAD=X) on the Rebound

Canadian Dollar: USD/CAD (CAD=X) on the Rebound

The Canadian dollar stepped back from the abyss seen on Friday. USD/CAD climbed steadily peaking at $1.3455 as COVID-19 pandemic fears gripped financial markets. The Dow Jones Industrial Average was threatening to close with another 1,000-point loss, and oil prices were in free-fall. Then Federal Reserve Chair Jerome Powell rode to the rescue. At 2:30 pm, he released a statement. It said: “The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy.” A sigh of relief echoed across Wall Street, and the DJIA recouped two thirds of its losses for the day. The U.S. dollar retreated following the statement, and USD/CAD closed at $1.3396.

Despite Powell’s comments, FX markets were extremely nervous when they opened in Asia.

Traders were spooked by news of a surge in COVID-19 cases in Italy, Spain, South Korea, and Iran. Also, Turkey/Syria hostilities and a missile test by North Korea didn’t help risk sentiment.

The Organization for Economic Cooperation and Development (OECD) slashed its G-20 growth forecasts from 2.9% to 2.4% because of the coronavirus, warning that if it became a pandemic, growth would slow to 1.5% in 2020.

The U.S. dollar opened in Toronto today, with losses against all the G-10 major currencies except for the British pound, due to rising expectations of coordinated G-7 interest rate cuts. French Finance Minister Bruno LeMaire got the ball rolling when he told a TV network; “There will be a concerted action. Yesterday I spoke with the G7 president, the U.S. Treasury Secretary Steven Mnuchin, and this week we will have a meeting by phone of the finance G7 ministers to coordinate our responses.”

The Canadian dollar is continuing to rally in early Toronto trading, with prices closely tracking EUR/USD moves. A Bank of Canada rate cut on Wednesday is discounted on expectations for a near-term rate cut by the Fed.

Today’s U.S. Institute for Supply Management Manufacturing report may take a back seat to Wall Street price action, and coordinated interest rate cut rumours.

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: 1.34.

The projected lower bound is: 1.32.

The projected closing price is: 1.33.

Candlesticks

A white body occurred (because prices closed higher 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 29 white candles and 21 black candles for a net of 8 white candles.

A bullish harami occurred (where the current small white body is contained within an unusually large black body). During a downtrend this pattern implies an end to the decline as the bears appear to have exhausted themselves.

During an uptrend (which appears to be the case with FOREX CAD=) the bullish harami pattern is bearish as the bears appear to be gaining strength as the bulls weaken.

A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.

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 45.2382. This is not an overbought or oversold reading. The last signal was a sell 1 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 58.07. 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 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 54. This is not a topping or bottoming area. The last signal was a sell 0 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 3 period(s) ago.

Rex Takasugi – TD Profile

FOREX CAD= closed up 0.001 at 1.333. Volume was 89% below average (consolidating) and Bollinger Bands were 22% narrower than normal.

Open     High      Low     Close     Volume___
1.332 1.334 1.332 1.333 5,763
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 1.33 1.32 1.32
Volatility: 7 5 5
Volume: 65,713 52,332 63,675

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 0.9% 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 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 29 periods.

The following two tabs change content below.
HEFFX has become one of Asia’s leading financial services companies with interests in Publishing, Private Equity, Capital Markets, Mining, Retail, Transport and Agriculture that span every continent of the world. Our clearing partners have unprecedented experience in Equities, Options, Forex and Commodities brokering, banking, physical metals dealing, floor brokering and trading.