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Monday, May 10, 2021

Canadian Dollar: USD/CAD (CAD=X) suffers from a downturn in risk sentiment

Canadian Dollar: USD/CAD (CAD=X) suffers from a downturn in risk sentiment

The Canadian dollar is rangebound no more. Prices soared through the top of the USD/CAD $1.3040-$1.3240 band that contained price action since October 11 yesterday and continued to climb overnight. That move is a sharp contrast to the move that occurred immediately following Tuesday release of the Canadian Manufacturing Shipments report. September shipments were expected to drop 0.6% m/m. The drop of just 0.2% surprised traders and USD/CAD dropped to 1.3190. However, the details were a tad less stellar, and the sellers became buyers, lifting USD/CAD to 1.3220.

Prices accelerated around lunchtime due to dovish comments from Bank of Canada Deputy Governor Carolyn Wilkins. She addressed the Montreal International Finance Club, speaking about “Financial Uncertainty in an Uncertain World.” Her comments about how the BoC would respond to an economic downturn and financial stress triggered by bad news on the trade front, sent USD/CAD soaring. She said “Our policy interest rate may be relatively low now, but at 1.75% we still have room to manoeuvre. And, we have other options in our tool kit, such as extraordinary forward guidance and large-scale asset purchases.” If traders were not thinking about BoC rate cuts in December, they sure were after her speech.

In addition to the domestic influences undermining the Canadian dollar, the loonie also suffered from a downturn in risk sentiment. Traders are concerned that the U.S./China trade talks have stalled and President Trump’s repeated threats to raise tariffs even higher if a trade deal is not reached, didn’t help sentiment. Even worse, the U.S. Senate passed a bill, “The Hong Kong Human Rights and Democracy Act,” which China sees as meddling in its internal affairs. The Act requires the Senate to certify annually as to Hong Kong’s autonomy from China to maintain its special trading status. Beijing was livid and summoned some U.S. embassy officials to express their dissatisfaction.

FX risk sentiment took a hit on the news. The Japanese yen rallied, and the commodity currency bloc was sold.

The U.K. leaders debate between Prime Minister Boris Johnson and Labour’s Jeremy Corbyn was considered a draw. That was a bit of bad news for GBP/USD, which dropped from $1.2929 to $1.2888 as the risks for another minority government rose.

Today, Canadian dollar traders are awaiting the release of October inflation data. Analysts expect headline CPI to have risen 0.4% m/m.

Technical Indicators

Overall, the bias in prices is: Sideways.

The projected upper bound is: 1.34.

The projected lower bound is: 1.32.

The projected closing price is: 1.33.


A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 5 white candles and 4 black candles for a net of 1 white candles. During the past 50 bars, there have been 27 white candles and 22 black candles for a net of 5 white 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 70.2968. This is not an overbought or oversold reading. The last signal was a sell 4 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 65.85. 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 98 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 158.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 3 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 14 period(s) ago.

Rex Takasugi – TD Profile

FOREX CAD= closed up 0.004 at 1.331. Volume was 28% below average (neutral) and Bollinger Bands were 25% wider than normal.

Open     High      Low     Close     Volume___
1.327 1.333 1.326 1.331 49,821
Technical Outlook 
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 1.32 1.32 1.33
Volatility: 4 5 6
Volume: 64,498 69,074 82,211

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 0.2% above its 200-period moving average and is in an upward trend. Volatility is low 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 bullish on CAD= and have had this outlook for the last 6 periods.

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