Canadian Dollar: USD/CAD (CAD=X) Shows Resilience
The Canadian demonstrated its resilience overnight. The U.S. dollar squeezed out gains against the major G-10 currencies, yet USD/CAD managed to remain below the psychologically important $1.3000 level. Markets are content to believe that U.S./Iran tensions have eased because Iran has yet to retaliate for the U.S. killing of Iran Revolutionary Guards General Soleimani. The news media is filled with speculation about how U.S./Iran relations will unfold but, as evidenced by FX price activity, FX markets do not seem to care.
The spike in West Texas Intermediate oil prices that followed news of the U.S. drone attack on the Iranian general is rapidly unwinding, which may limit Canadian dollar upside from current levels. WTI prices topped out at $63.90/barrel yesterday and are trading in Toronto at $62.71/b.
China’s Minister for Agriculture and Rural Affairs said China would not raise quotas for the import of grains. If true, it may hamper Beijing’s ability to purchase all of the $80.0 billion in U.S. agriculture products required by the Phase 1 trade deal.
Asia FX markets opened with a mild risk-off tone, which did not last the session. The major equity indices closed with solid gains and European equity bourses are higher as well. The Australian dollar was the worst-performing major G-10 currency against the US dollar, losing 0.88%. Weaker than expected Australian data and sales of AUD/JPY fueled the losses.
USD/JPY rallied from 108.28 to 108.49 with prices supported by a rise in U.S. Treasury yields and gains in the Nikkei 225. The apparent easing of U.S./Iran tensions sparked some unwinding of some “safe-haven” trades. USD/CHF climbed as well, rising to 0.9707 from its overnight low of 0.9680.
EUR/USD direction is undecided. The single currency bounced in a $1.1166-$1.1196 band. Better than expected eurozone November retail sales data supported prices as did the preliminary inflation data for December, which showed Consumer Price Index at 1.3% y/y, as expected.
GBP/USD is trading at $1.3118, near the bottom of its overnight $1.3104-$1.3210 range. The currency pair continues to unwind the gains following the U.K. election, but prices remain in an uptrend while trading above $1.3090.
The Canadian dollar is struggling to extend its recent rally. Weaker-than-expected Canadian Merchandise trade data, noting softer exports, didn’t do anything to incite fresh demand. The Canadian Ivey Purchasing Managers Index report is due later today and is forecast to drop to 53.8 from 60.0. Significant deviations from the forecast usually lead to some Canadian dollar trading volatility, even though many Bank economists ignore the results.
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: 1.29.
The projected closing price is: 1.30.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 3 white candles and 7 black candles for a net of 4 black candles. During the past 50 bars, there have been 22 white candles and 27 black candles for a net of 5 black candles.
An engulfing bullish line occurred (where a white candle’s real body completely contains the previous black candle’s real body). The engulfing bullish pattern is bullish during a downtrend (which appears to be the case with FOREX CAD=). It then signifies that the momentum may be shifting from the bears to the bulls.
If the engulfing bullish pattern occurs during an uptrend, it may be a last engulfing top which indicates a top. The test to see if this is the case is if the next candle closes below the top of the current (white) candle’s real body.
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 35.1192. This is not an overbought or oversold reading. The last signal was a buy 2 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 35.09. This is not a topping or bottoming area. However, the RSI just crossed above 30 from a bottoming formation. This is a bullish sign. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 0 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 -71. This is not a topping or bottoming area. The last signal was a buy 0 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 24 period(s) ago.
Rex Takasugi – TD Profile
FOREX CAD= closed up 0.004 at 1.300. Volume was 11% below average (neutral) and Bollinger Bands were 32% wider than normal.
Open High Low Close Volume___
1.296 1.303 1.295 1.300 53,300
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: 5 5 5
Volume: 39,226 52,969 70,092
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 1.9% below 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 17 periods.