Canadian Dollar: USD/CAD (CAD=X) Takes Header
The Canadian dollar fell off a cliff overnight. It lost nearly 2.5% after oil prices collapsed. West Texas Intermediate (WTI) oil prices plunged over 30% after Saudi Arabia triggered an oil price war. Asia traders panicked, driving USD/CAD from a closing level of $1.3425 on Friday to a peak of $1.3757 in Asia. The move was exacerbated due to stop-loss buying when prices blasted above $1.3550 and $1.3665.
Saudi Arabian officials were miffed when Russia refused to agree to an additional 1.5 million barrels per day in crude production cuts. The Saudi’s were hoping to put a floor under oil prices that were under-pressure from falling global demand and forecasts for a prolonged global economic growth slowdown. Russia thought cutting production would not benefit prices but support American shale producers. The Saudi’s reacted by starting a price war to bolster their finances by increasing its market share.
Freefalling oil prices were just one of the factors that spooked global markets overnight. Coronavirus fears accelerated. Italy announced that it quarantined over 16 million people in the northern area of the country, which includes Milan and Venice. Major governments placed travel restrictions with Iran suspending flights to Europe and the United States. COVID-19 cases have tripled in a week with over 110,000 infections worldwide.
The U.S. opened in Toronto with steep losses against the Japanese yen, Euro and British pound.
EUR/USD climbed to $1.1490 from Friday’s Toronto close of $1.1289. The gains were powered by rising expectations that the Fed will slash U.S. interest rates again. The CME Fedwatch tool predicts that there is a 77% chance the Fed cuts rates by 0.50% on March 18. On Friday, those odds were zero. Many analysts believe a rate cut could happen as soon as today. The sharply narrowing interest rate differentials between the U.S. and eurozone are underpinning EUR/USD.
The European Central Bank (ECB) has not reacted to the COVID-19 crisis. Analysts suggest that eurozone rates, which are already negative, are too low for a rate cut to be beneficial.
GBP/USD soared alongside EUR/USD, but it gave back most of those gains and is trading just above Friday’s close. GBP/USD climbed from $1.3048 to $1.3199 before sellers emerged because of UK coronavirus issues and fears of a “hard” exit from EU/UK trade talks.
Domestic and U.S. economic data releases will be ignored as traders focus on the stock market and COVID-19 headlines.
Overall, the bias in prices is: Upwards.
Note: this chart shows extraordinary price action to the upside.
By the way, prices are vulnerable to a correction towards 1.33.
The projected upper bound is: 1.39.
The projected lower bound is: 1.36.
The projected closing price is: 1.37.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 8 white candles and 2 black candles for a net of 6 white candles. During the past 50 bars, there have been 33 white candles and 17 black candles for a net of 16 white candles.
A bearish harami occurred (where the current small black body is contained within an unusually large white body). During an uptrend (which appears to be the case with FOREX CAD=) this pattern implies an end to the rally as the bulls appear to have exhausted themselves.
During a downtrend the bearish harami pattern is bullish as the bulls appear to be gaining strength as the bears weaken.
A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.
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 85.3319. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a sell 6 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 78.49. 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 sell 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 225.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 2 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 8 period(s) ago.
Rex Takasugi – TD Profile
FOREX CAD= closed down -0.001 at 1.369. Volume was 96% below average (consolidating) and Bollinger Bands were 118% wider than normal.
Open High Low Close Volume___
1.370 1.371 1.369 1.369 2,127
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 1.34 1.32 1.32
Volatility: 12 7 6
Volume: 82,954 58,131 63,652
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 3.6% above its 200-period moving average and is in an upward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. 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 34 periods. Our momentum oscillator is currently indicating that CAD= is currently in an overbought condition.