Canadian Dollar: USD/CAD (CAD=X) Seeks Direction

Canadian Dollar: USD/CAD (CAD=X) Seeks Direction

Canadian Dollar: USD/CAD (CAD=X) Seeks Direction

The Canadian dollar tried to rally last week but failed. Slightly dovish comments by Bank of Canada Governor Stephen Poloz combined with broad-based U.S. dollar demand against the major G-10 currencies and a sharp drop in West Texas Intermediate oil prices, fueled Canadian dollar selling.

Canadian dollar bulls hoped for a reprieve from Friday’s Canadian employment report. They got one. The Labour Force Survey showed Canada added 35,200 jobs, beating the forecast for a gain of 25,000, and even better the gains were full-time. At the same time, the U.S. non-farm payrolls report disappointed traders. The consensus forecast was for a gain of 164,000, but the result was only 145,000. Also, Average Hourly earnings were weak, rising just 0.1% m/m. The two reports fueled Canadian dollar buying, but the demand quickly faded.

The Bank of Canada releases its quarterly Business Outlook survey this morning. Traders will be looking for insight from this report to gauge BoC’s monetary policy intentions at the end of the month. There is a risk that soft Canadian data in November and December may have offset positive sentiment from the announced US/China Phase 1 trade deal. If so, the Canadian dollar would be vulnerable to downside pressure as it would suggest a dovish BoC monetary policy decision.

The Canadian dollar popped at the Asia open, but those gains evaporated quickly. Asia traders bought the commodity bloc currencies on a wave of optimism ahead of Wednesdays Phase 1 trade deal signing. However, the AUD/USD and NZD/USD rally stalled and the gains were erased by the Toronto open.

USD/JPY managed to extend Friday’s gains overnight. Japan was closed for a holiday, but steady to firm US Treasury yields and the improved risk sentiment tone underpinned the currency. USD/JPY technicals are also bullish looking for a break of 111.00 to extend the rally to 110.60.

The European session was a tad less upbeat than that of Asia. Sterling was a big reason for that. Bank of England Monetary Policy Committee member Gertjan Vlieghe suggested that U.K. interest rates could easily be cut this month, echoing dovish comments from Governor Carney and others. However, it was weaker than expected December Gross Domestic Product data which knocked GBP/USD for a loop, sending down to $1.2967 from $1.3047.

EUR/USD trading was a tad more subdued with prices locked in a $1.1113-35 band. There are large option strikes between $1.1100-1.1130 expiring today which have hampered trading.

Other than the BoC’s Business Outlook Survey, there isn’t any U.S. or Canadian economic data of note, available today.

Technical Indicators

Overall, the bias in prices is: Sideways.

By the way, prices are vulnerable to a correction towards 1.31.

The projected upper bound is: 1.31.

The projected lower bound is: 1.30.

The projected closing price is: 1.31.

Candlesticks

A black body occurred (because prices closed lower 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 21 white candles and 28 black candles for a net of 7 black candles.

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 64.9082. This is not an overbought or oversold reading. The last signal was a buy 7 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 44.00. 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 buy 5 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 37. This is not a topping or bottoming area. The last signal was a buy 5 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 down -0.000 at 1.305. Volume was 100% below average (consolidating) and Bollinger Bands were 8% wider than normal.

Open     High      Low     Close     Volume___
1.305 1.306 1.305 1.305 122
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 1.30 1.32 1.32
Volatility: 3 5 5
Volume: 44,487 49,541 68,620

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 1.4% below its 200-period moving average and is in an downward 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 bearish on CAD= and have had this outlook for the last 22 periods.

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