USDCAD Rally at Risk into US CPI- 1.3080 Offers First Line of Defense
- USDCAD at risk into US CPI- Broader outlook constructive above 1.3030
- Updated targets & invalidation levels
Chart Created Using TradingView
Technical Outlook: USDCAD is trading within the confines of an ascending channel formation off the monthly lows after failing to hold above the July high-day close at 1.3186. We’ve been tracking this trade closely over the past few weeks on SB Trade Desk with bearish divergence into a support trigger-break earlier today shifting our focus to the downside. Heading into tomorrow’s U.S. Consumer Price Index (CPI) release, the immediate risk is for a move lower before resumption of the broader advance.
The pair is testing interim support here at 1.3138/48 with subsequent support objectives at the monthly open at 1.3104 & 1.3077 – area off interest for possible exhaustion / long-entries. The broader focus remains weighted to the topside while above the 1.3029 – region defined by the weekly opening-range low, the 50% retracement and a sliding parallel of the broader encompassing structure off the yearly lows.
A breach of the highs targets the 200-day moving average (~1.3260) backed by 1.3296 & the 100% extension at1.3382. From a trading standpoint, the focus is lower for now, but we’d be looking to fade weakness into structural support. For the complete setup and to continue tracking this trade & more throughout the week- Subscribe to SB Trade Desk.
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- A summary of the DailyFX Speculative Sentiment Index (SSI) shows traders are net shortUSDCAD- the ratio stands at -1.75 (36% of traders are long)- bullish reading
- Long positions are 45.0% above levels seen last week while Short positions are 45.3% higher over the same time period.
- Open interest is 1.0% lower than yesterday and 4.4% below its monthly average.
- Although SSI will offer limited guidance within the current price range, there appears to be a broader shift in retail positioning with the ratio flipping to net short earlier this week.Looking back over the last few months, it’s worth noting that retail crowds have been pretty decent in calling the turns within this range and further supports the notion of near-term weakness before moving higher.
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Relevant Data Releases This Week
Other Setups in Play:
- AUD/USD to Face Employment Report- Outlook Constructive Above 0.7380
- GBP/JPY & BoE: Weakness to Be Viewed as Opportunity
- NZD/USD: Bearish Bias Intact as FX Sentiment Narrows Ahead of GDP
- GBP/USD: Constructive Above 1.3155- Buy the Dip Setup into UK CPI
Looking for more trade ideas? Review DailyFX’s Top Trading Opportunity of 2016
---Written by Michael Boutros, Currency Strategist with DailyFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.