Canadian Dollar: USD/CAD (CAD=X) Reacts Oil Price Plunge
The Canadian dollar is on the defensive after a steep drop in oil prices to start the week. West Texas Intermediate (WTI), the North American benchmark price for crude, gapped lower at the Asia open, and it knocked the Canadian dollar down, in the process. Both instruments recovered, albeit modestly and the Loonie is trading in Toronto right where it finished on Friday.
Chinese markets reopened after their Lunar New Year holiday’s, and they were ugly as local traders had their first opportunity to react to the coronavirus outbreak. China announced that there were 17,205 confirmed cases and that the death toll climbed to 361. The Shanghai Shenzhen CSI 300 index plummeted, losing 7.9% and that was despite government intervention. The Peoples Bank of China (PBOC) reportedly ordered local brokerage firms not to allow “short-selling,” even as many commodity prices reached “limit-down” levels. The PBoC injected 1.2 trillion yuan into the system and trimmed seven- and 14-day repo rates by 10 basis points. USD/CNY soared rising from 6.9364 on January 24 to 7.0260.
China’s state oil company Sinopec said refinery production had dropped by 600,00 barrels per day, and there are rumours that China oil demand is down 20%. That news was offset by a report Saudi Arabia would temporarily reduce its crude production by 1.0 million barrels/day.
The Chinese market action spooked the commodity bloc currencies, although the reactions were relatively tame. The Australian, New Zealand, and Canadian dollars had already reacted to the coronavirus, while Chinese markets were playing “catchup.” AUD/USD and NZD/USD opened in Toronto, mostly unchanged from Friday’s closing levels.
That wasn’t the case for the British pound. GBP/USD screamed lower, falling from $1.3205 at the Asia open to $1.3048 in Toronto. Traders were unnerved ahead of, and after U.K. Prime Minister Boris Johnson and European Union Head of Task Force for U.K. relations, set out their trade negotiating positions.
EUR/USD was weighed down by broad U.S. dollar demand and the rise in USD/CNY. Markit Manufacturing Purchasing Managers’ Index reports from Spain, Italy, France, and Germany, as well as the eurozone, were a tad firmer than the previous month but still below 50, which indicates economic growth is contracting. EUR/USD dropped to $1.1069 from $1.1094.
The Canadian dollar continues to be weighed down by the shift into safe-haven trades due to the Wuhan coronavirus, and it could suffer further losses if today’s U.S. Institute for Supply Management Manufacturing survey is higher than expected. There are not any notable Canadian economic reports available today.
Overall, the bias in prices is: Upwards.
The projected upper bound is: 1.34.
The projected lower bound is: 1.32.
The projected closing price is: 1.33.
During the past 10 bars, there have been 7 white candles and 2 black candles for a net of 5 white candles. During the past 50 bars, there have been 25 white candles and 24 black candles for a net of 1 white candles.
A gravestone doji occurred. This often signifies a top (the longer the upper shadow, the more bearish the signal).
A long upper shadow occurred. This is typically a bearish signal (particularly when it occurs near a high price level, at resistance level, or when the security is overbought).
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 86.6832. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a sell 3 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 71.23. 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 buy 20 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 136.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a buy 20 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 18 period(s) ago.
Rex Takasugi – TD Profile
FOREX CAD= closed unchanged at 1.328. Volume was 98% below average (consolidating) and Bollinger Bands were 36% wider than normal.
Open High Low Close Volume___
1.328 1.329 1.328 1.328 1,374
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 1.32 1.31 1.32
Volatility: 4 5 5
Volume: 49,165 46,548 65,846
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% above 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 moderate flows of volume into CAD= (mildly bullish). Our trend forecasting oscillators are currently bullish on CAD= and have had this outlook for the last 9 periods. Our momentum oscillator is currently indicating that CAD= is currently in an overbought condition.
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