USD/CAD (CAD=X) Remains Under Pressure
The Canadian dollar could not generate much upside traction overnight, despite a slight thaw in global risk aversion sentiment. The Peoples Bank of China (PBoC) issued a paper suggesting that made a case for a cut in the Reserve Rate Ratio’s (RRR) That is a simulative measure and Asia markets reacted like it had already occurred. Asia Equity indices climbed, led by gains in the Nikkei 225 and the Australian dollar.
The Canadian dollar drifted higher, but the gains were limited. USD/CAD sentiment is overwhelmingly bullish. The U.S. tariffs on imports of Canadian steel, aluminum and softwood lumber have underpinned the USD/CAD since they were announced. President Trump’s threats to put tariffs on cars, agricultural products and dairy products have made things worse, especially in the context of the North American Free Trade Agreement renegotiation. The president has often said that he would tear up NAFTA, and his latest actions suggest the agreement in on a conveyer belt to a shredder.
The U.S. Federal Reserve Open Market Committee (FOMC) has added to the negative Canadian dollar sentiment. Last week’s FOMC policy statement, press conference and updated economic projections underscored the differences in the Bank of Canada and Fed monetary policy.
The lack of clarity around trade hampers the Bank of Canada’s ability to raise domestic rates. They are unwilling to increase the cost of borrowing in the face of heightened economic uncertainty coming from the U.S. The Fed does not have the same constraints. They are projecting two more interest rate hikes in 2018.
The long-term Canadian dollar technical outlook took a turn for the worse two weeks ago. USD/CAD broke the downtrend line from the January 2016 peak of $1.4675, which sets the stage for additional gains. A decisive break of $1.3370 would target $1.3680.
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 1.29.
The projected upper bound is: 1.35.
The projected lower bound is: 1.32.
The projected closing price is: 1.33.
A black body occurred (because prices closed lower 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 33 white candles and 16 black candles for a net of 17 white candles.
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 96.2024. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a sell 16 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 72.46. 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 68 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 127.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 6 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 7 period(s) ago.
Rex Takasugi – TD Profile
FOREX CAD= closed down -0.000 at 1.331. Volume was 97% below average (consolidating) and Bollinger Bands were 28% wider than normal.
Open High Low Close Volume___
1.331 1.332 1.330 1.331 3,117
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 1.31 1.29 1.27
Volatility: 8 8 9
Volume: 82,874 87,947 80,590
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 4.6% 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 5 periods. Our momentum oscillator is currently indicating that CAD= is currently in an overbought condition.