Talking Points:
- USD/CAD November Rally Exhausted Ahead of September High (1.3456).
- NZD/USD Bearish Formation Remains Intact Ahead of New Zealand Trade Balance.
- USDOLLAR Continuation Pattern Remains in Focus Following Lackluster 3Q GDP Report.
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Chart - Created Using FXCM Marketscope 2.0
- Even though USD/CAD preserves the upward trending channel from the previous month, the pair may have marked a failed attempt to test the September high (1.3456) as the Relative Strength Index (RSI) retains the bearish formation from back in July.
- Will keep a close eye on the near-term rebound in oil prices amid the historical relationship with the Canadian dollar; failure to hold above trendline support may highlight a larger pullback in the exchange rate as the Bank of Canada (BoC) adopts an improved outlook for the region.
- The DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-short USD/CAD since November 4, but the ratio appears to be coming off of recent extremes as it narrows to -2.35 as 30% of traders are now long.
NZD/USD
- Near-term outlook for NZD/USD remains mired by the bearish formation in price & the RSI; waiting for a break/close below former resistance around 0.6400 (61.8% retracement) to 0.6440 (23.6% retracement) to favor a further decline.
- With New Zealand’s Trade Balance expected to show a narrowing deficit, an improvement in the balance of payments may encourage the Reserve Bank of New Zealand (RBNZ) to endorse a wait-and-see approach at the December 9 interest rate decision as the previous rate-cuts continue to work their way through the real economy.
- Failure to retain the downward trending channel paired with a move back above former support around 0.6630 (38.2% retracement) raises the risk for a larger rebound in the exchange rate.
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USDOLLAR(Ticker: USDollar):
| Index | Last | High | Low | Daily Change (%) | Daily Range (% of ATR) |
|---|---|---|---|---|---|
| DJ-FXCM Dollar Index | 12163.85 | 12178.38 | 12158.57 | -0.09 | 45.81% |
Chart - Created Using FXCM Marketscope 2.0
- USDOLLAR may continue to consolidate in the days ahead as it remains stuck within a bull-flag formation; will retain a constructive outlook for the greenback amid market expectations for a December Fed rate-hike.
- Despite the upward revision in the preliminary U.S. 3Q Gross Domestic Product (GDP) report, the downward revision in Personal Consumption may become a growing concern for Fed officials as it dampens the outlook for the holiday shopping season.
- Nevertheless, will retain a constructive view for the USDOLLAR as it holds above former resistance around 12,049 (78.6% retracement) to 12,082 (61.8% expansion), with the topside region of interest standing around 12,273 (161.8% expansion) to 12,296 (100% expansion).
*As we approach the holidays and thus illiquid markets, it's worth reviewing principles that help protect your capital. We call these principles the "Traits of Successful Traders."
Three Factors Warn of Perfect Storm in FX Markets - Caution Advised
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--- Written by David Song, Currency Analyst
To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.
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