Despite Event Risk, DailyFX Analysts Hold To A Short Canadian Dollar Bias There is a looming event risk for Canadian dollar traders in second quarter GDP numbers due tomorrow. Despite this, our DailyFX Analysts are taking a clear bias in the market with views that are consistently short Canadian Dollars. See what pair pairs each Analyst is looking at and the reason for their bias below:
My picks: Long USD/CAD Expertise: Fundamentals, Volatility and Sentiment Average Time Frame of Trades: 1 day to 3 months
Over the last few days the Canadian dollar has been trading in a very tight range. Yet, I continue to expect more dollar strength going forward. My recommendation is to buy USD/CAD at the market for 300 pips in profit potential with a stop in a daily close below 1.03. First, dollar’s undervaluation is now likely to lead to a substantial improvement of the US Balance of Payments through continued strong export performance. Second, with the world economy slowing down is reasonable to think that the demand for commodities will also begin to slow down. As a result of this, commodity sensitive currencies like AUD, NZD and CAD will be particularly vulnerable.
My picks: Long EURCAD Expertise: Combining Money Management with Fundamental and Technical Analysis Average Time Frame of Trades: 3 days - 1 week
Over the past three weeks, EURCAD has plunged 950 points with little in break. Many of these quick moves are popping up around the market and few have any significant retracements. For this Canadian dollar cross, the technicals and fundamentals are lining up for a potentially significant rebound. Technically the pair has marked a notable double bottom at 1.5260/80 with the May 29th swing low that happens to coincide with a 50 percent retracement level around 1.5230 (from the Dec. 25th to Mar. 31st swing high). Price has already reversed from this level and recently the push higher broke the steady descending trendline from the August 7th high. Caution should still be taken though as the break hasn't spurred much in the way of momentum, yet.
Fundamentally, there is considerable event risk from both sides of the market for the coming 24 hour period. The Canadian docket will see second quarter GDP (expected to rebound from contractionary territory) and the Euro Zone will print the jobless rate number and the now closely watch CPI estimate figure for August (expected to step back). If these come out as expected, they would be detrimental to a long bias. Rate expectations on the other hand continue to skew in favor of the euro. Expectations for multiple cuts from the ECB have been throttled back to 20 basis points of easing through the coming year (meaning there is debate as to whether they will actually cut or not). For the BoC, 46 basis points are forecasted and that number is picking up quickly. Considering the event risk ahead, a cautious approach to this pair would be to wait for a pull back; but the data may come out in favor of those already long.
My picks: Long USDCAD Expertise: Macro Fundamentals, Classic Technical Analysis Average Time Frame of Trades: 1 week - 6 months
The US dollar rallied convincingly against its Canadian counterpart to break above the major range top at 1.0376. The rally found resistance at 1.0725 and corrected lower, with current price action seeing consolidation between the 23.6% and the 38.2% Fibonacci retracements of the 07/15-08/12 rally at 1.0550 and 1.0440, respectively. Look to go long above 1.0440, targeting a break above resistance to challenge the last major top at 1.0725.
My picks: Long USDCAD Expertise: Fundamentals Combined With Technicals Average Time Frame of Trades: 2-4 Days
I am seeing the USDCAD consolidating above 1.0445 the 38.2% Fibo level of the 0.9972-1.0735 rally, with support holding here we could see a more higher. Tomorrow's GDP numbers are expected to show a slight improvement, which shouldn't inspire loonie bulls. However, anything less than the forecasts could send the pair back towards the monthgly highs.Therefore, I will look for a retrace to 1.0671 the 8/19 high.