News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Bullish
Oil - US Crude
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Wall Street
Mixed
Gold
Mixed
GBP/USD
Mixed
USD/JPY
Bullish
More View more
Real Time News
  • It seems the markets are riding high, but risk is always lurking around the corner. Consider your escape plan before you find yourself in collapsing market. What are the top havens for different conditions in 2021? Find out from @JohnKicklighter here: https://t.co/1oeXWEsJkb https://t.co/IyQdfq29fz
  • Myth or fact? One thing is for sure, there are a lot of misconceptions about trading. Knowing the difference between common trading myths and the reality is essential to long-term success. Find out about these 'myths' here: https://t.co/EDvQdHfIPm https://t.co/R7pa7DsM8n
  • What are some monetary policies that could affect Gold this quarter? Get your Gold free forecast here: https://t.co/bTXkGN1CIM #DailyFXGuides https://t.co/EhdZpmkzaH
  • Even more remarkable than the record high levels of leverage registered in US equities this past week was the attention it garnered. Paying attention to risk is a threat when markets are this high and the docket as dense as it is this week. My outlook: https://www.dailyfx.com/forex/video/daily_news_report/2021/01/23/Dow-VIX-Tesla-and-Leverage-Reflect-Greater-Risk-to-the-Relentless-Bull-Market.html?ref-author=Kicklighter&QPID=917719&CHID=9 https://t.co/KBOJIRPTQe
  • Consolidation or bull flag? A bull flag is a continuation pattern that occurs as a brief pause in the trend following a strong price move higher. Learn how to better spot these formations here: https://t.co/yOEvLjKnct https://t.co/qP2PbS4dsY
  • Are you new to trading? Technical analysis of charts aims to identify patterns and market trends by utilising different forms of technical chart types and other chart functions. Get a refresher on technical analysis or begin building your knowledge here: https://t.co/qV3c7a4YR3 https://t.co/POGWDIkqqz
  • USD hegemony is at risk thanks to changes in the global economy and the long-term consequences of the US-China trade war. Get your market update from @CVecchioFX here: https://t.co/5GO9UrvO4y https://t.co/H76jNJJxU5
  • Did you know a Doji candlestick signals market indecision and the potential for a change in direction. What are the top five types of Doji candlesticks? Find out https://t.co/c51s3IBcEu https://t.co/1TiEWCbJ6t
  • Use this technical analysis pattern recognition skills test to sharpen your knowledge: https://t.co/Qgz89PTxnu https://t.co/fN2mfHgpON
  • The formation of several bullish technical patterns suggests that the haven-associated Japanese Yen is at risk of further losses against the Euro and Australian Dollar. Get your market update from @DanielGMoss here:https://t.co/qxQwHgD9Ey https://t.co/ym73tgtHLn
USD/CAD Poised to Fall, How Far Can Implied Volatility Take it?

USD/CAD Poised to Fall, How Far Can Implied Volatility Take it?

Daniel Dubrovsky, Analyst

Talking Points:

  • Canadian Dollar implied volatility is amongst the most elevated of its major peers
  • Prices could be vulnerable to ongoing NAFTA talks and incoming local jobs data
  • USD/CAD could be at risk of further losses after confirmation of a reversal pattern

Just started trading USD/CAD? Check out ourbeginners’ FX markets guide!

Canadian Dollar 1-day implied volatility is not only the most elevated of the majors at 12.45%, but also it is around a one-month high. The similar one-week measurement is also amongst the largest of its major counterparts and sits just above a two-week high. What might explain these market expectations? Perhaps political risk and incoming economic data.

Implied Volatility and Market Range for the FX Majors

USD/CAD Poised to Fall, How Far Can Implied Volatility Take it?

Recently, the Canadian Dollar has benefited from more welcoming NAFTA developments. On Wednesday, Canada’s Foreign Affairs Minister Chrystia Freeland noted that they are ‘making progress good progress’ on negotiations with the US. In addition, Donald Trump softened the demand for automotive content, now applying the 85% trio threshold to only critical car components. As Trump’s deadline to form a provisional pact approaches by the end of next week, the Loonie could swing depending on how these talks unfold.

Meanwhile keep an eye out for Friday’s local employment report. The country is expected to add more jobs while unemployment stays the same. In addition, average hourly earnings are expected to rise by the most since October 2012. However, data out of Canada has been increasingly underperforming relative to economists’ expectations since late January. This opens the door for an unpleasant surprise which could lower hawkish Bank of Canada policy expectations and in turn hurt the currency.

With that in mind, let’s take a look at where priced-in volatility may take USD/CAD.

For other FXimplied volatility articles, please visit the Binaries page.

USD/CAD Technical Analysis: Major Down Move Coming?

On a daily chart, USD/CAD has pushed below the neckline of a head and shoulders reversal pattern, falling as expected. This opens the door for further losses. The ultimate target of the pattern is just above the 76.4% Fibonacci retracement level at 1.2456. But getting there will require overcoming a few obstacles.

On its way lower, the “day range low” at 1.2682 might stand in the way as immediate support which is closely aligned with the 50% midpoint of the retracement. Should prices fall below that, the “week range low” at 1.2616 would be the next target.

On the other hand, if prices push higher and above the neckline, the “day range high” at 1.2848 could end up as immediate resistance. A push above that exposes the “week range high” at 1.2914 which looks to be like a rather stubborn ceiling. This is because it closely aligns with the 23.6% Fibonacci retracement and the right shoulder of the formation.

USD/CAD Poised to Fall, How Far Can Implied Volatility Take it?

USD/CAD Trading Resources:

--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

To receive Daniel's analysis directly via email, please SIGN UP HERE

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES