Canadian Dollar: USD/CAD (CAD=X) Worried by Wall Street Woes

Canadian Dollar: USD/CAD (CAD=X) Worried by Wall Street Woes

Canadian Dollar: USD/CAD (CAD=X) Worried by Wall Street Woes

Wall Street stock prices were knocked for a loop yesterday, and those losses weighed on the Canadian dollar. The Dow Jones Industrial Average gave back all February’s gains in a one-day 3.56% plunge in the benchmark index. The S&P 500 and NASDAQ followed the DJIA lower. Stock traders were spooked by news reports that the coronavirus was expanding rapidly outside of China. Large outbreaks in Northern Italy and South Korea reminded traders that the virus wasn’t just a Chinese problem.

World Health Officials (WHO) didn’t do anything to calm markets. A WHO official said “For the moment, we are not witnessing the uncontained global spread of this coronavirus, and we are not witnessing large-scale severe disease or death.” Then added, “countries should be doing everything we can to prepare for a potential pandemic.”

Japanese investors abandoned their quest for yield and sought safe-haven currencies driving USD/JPY down to 110.39 from 111.03. Prices are still above the uptrend line but have given back a large portion of last week’s gains.

Analysts are speculating about how the Fed will react to the coronavirus-fueled, Wall Street meltdown. They cut U.S. rates when uncertainty around the China/U.S. trade talks threatened to derail economic growth. The COVID-19 outbreak threatens a similar result. The Fed is in “wait-and-see” mode and officials have said it is too early to tell if the virus will be an economic blip or have a more lasting effect.

The Canadian dollar stayed on the defensive, overnight. It lagged AUD/USD and NZD/USD gains while trading in a USD/CAD $1.3280-$1.3303 range. The domestic currency is suffering from elevated concerns that recent economic weakness, exacerbated by railway blockades and COVID-19 could force the Bank of Canada to cut rates as early as next week. Canada Gross Domestic Product results released on Friday could be the catalyst if Q4 growth is weaker than forecast.

Today’s U.S. economic reports are second-tier leaving Wall Street price action to drive currency direction.

Technical Indicators

Overall, the bias in prices is: Sideways.

By the way, prices are vulnerable to a correction towards 1.32.

The projected upper bound is: 1.34.

The projected lower bound is: 1.32.

The projected closing price is: 1.33.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 28 white candles and 22 black candles for a net of 6 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 67.1135. This is not an overbought or oversold reading. The last signal was a sell 10 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 57.81. 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 sell 10 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 52. This is not a topping or bottoming area. The last signal was a buy 1 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 sell 7 period(s) ago.

Rex Takasugi – TD Profile

FOREX CAD= closed down -0.001 at 1.328. Volume was 28% above average (neutral) and Bollinger Bands were 50% narrower than normal.

Open     High      Low     Close     Volume___
1.329 1.331 1.326 1.328 69,279
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 1.33 1.31 1.32
Volatility: 5 4 5
Volume: 51,392 49,570 63,847

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 0.5% above its 200-period moving average and is in an upward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods. 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 24 periods.

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