Canadian Dollar: USD/CAD (CAD=X) Supported by Positive Risk Sentiment

Canadian Dollar: USD/CAD (CAD=X) Supported by Positive Risk Sentiment

Canadian Dollar: USD/CAD (CAD=X) Supported by Positive Risk Sentiment

The Canadian dollar is trading sideways. It bounced around in a narrow USD/CAD range of $1.3035-$1.3046 overnight, unable to garner any traction in either direction. There aren’t any top-tier domestic economic data available until next Wednesday when the Canadian inflation report is released. That is the same day the Bank of Canada holds its first monetary policy meeting of 2020.

That meeting is not expected to result in a change to the benchmark overnight interest rate, which sits at 1.75%. However, traders expect a more dovish, rather than hawkish, leaning statement after Monday’s Business Outlook Survey only showed a modest improvement in sentiment. The future sales growth forecasts suggest a slight increase ahead but not enough for the BoC to move the needle on rates.

The U.S. dollar closed yesterday on a mildly negative note and continued to trade that way overnight and into the Toronto open. FX traders are feeling a tad more optimistic about global economic growth now that the Phase 1 U.S./China trade agreement is signed and sealed. The shift into risk-seeking trades has been moderate, but that is because the critical details of the trade deal were leaked, so yesterday’s ceremony didn’t offer any surprises.

China agreed to almost all the U.S. demands. They will increase imports of U.S. products and services to $200 billion/year, which included boosting agricultural and seafood products to $80.billion over two years. They even agreed to stop the forced transfer of technology in return for market access. Also, although some existing tariffs are reduced, the rest will remain in effect until President Trump is satisfied with the implementation of Phase 1 and when Phase 2 talks start.

AUD/USD traders liked the news and prices cracked above 0.6920 resistance and opened the door to further gains to $0.6990. However, some of the U.S. export gains could come at the expense of Australia and New Zealand, which diminishes the benefit from improved risk sentiment for those currencies and may slow topside moves. The Canadian dollar is also in that boat.

USD/JPY is struggling to maintain upside momentum above 110.00. Positive risk sentiment from the U.S./China trade deal is offset by the drop in U.S. Treasury yields for the past week.

EUR/USD is probing resistance in the $1.1170 zone, bolstered by broad US dollar weakness and the drop in USD/CNY which has led to a drop in the trade-weighted euro, according to Soc Gen economists.

GBP/USD is riding the wave of broad dollar weakness. It added to yesterday’s gains and is trading at a one-week high. Concerns that the Bank of England will cut rates at its January 30 meeting may limit gains.

FX markets have erased “trade tensions” from the agenda and are back focusing on economic data. There is plenty of that on tap today with U.S. Retail Sales being the major focus. They are expected to rise 0.4% in December. There isn’t any Canadian data available so the Canadian dollar will continue to track broad U.S. dollar moves.

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: 1.29.

The projected closing price is: 1.30.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 7 white candles and 3 black candles for a net of 4 white candles. During the past 50 bars, there have been 22 white candles and 27 black candles for a net of 5 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 46.2692. This is not an overbought or oversold reading. The last signal was a buy 9 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 42.53. 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 7 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 41. This is not a topping or bottoming area. The last signal was a buy 7 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 5 period(s) ago.

Rex Takasugi – TD Profile

FOREX CAD= closed up 0.000 at 1.304. Volume was 20% below average (neutral) and Bollinger Bands were 3% wider than normal.

Open     High      Low     Close     Volume___
1.304 1.306 1.303 1.304 46,917
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: 55,030 49,220 68,360

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 1.5% 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 24 periods.

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