USD/CAD Rebound Susceptible to Jump in Canada CPI

2017-01-19 18:34:00

Talking Points

USD/CAD rally eyeing initial resistance targets ahead of Canada CPI
Updated targets & invalidation levels
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Technical Outlook: Last week we highlighted a key near-term Fibonacci support confluence at 1.3015/25 with the focus lower sub-1.3180. A final dip into this support barrier earlier this week was followed by a breach of the object weekly opening range high and shifts the focus back to the topside in USDCAD. Yesterday’s rally marked the largest single-day advance in the pair since June 24th (Brexit) and is on pace to post its largest weekly advance since May.

Note that the pair has been trading within the confines of a broad descending pitchfork formation extending off the October & December highs with the lower median-line parallel catching the lows in price this week. If we close at these levels, the pair will have marked an outside weekly reversal off support- the last two times we saw this, prices continued to push higher into the following week before turning over.

The immediate rally is approaching initial resistance at the 61.8% retracement at 1.3377 backed closely by the 50-line / monthly open at 1.3435- both of which could offer more significant kickback. Bottom line, heading into tomorrow’s Canada Consumer Price Index (CPI) release, the risk is for pullback off these levels with the broader focus weighted to the topside while above the May high 1.3188. A breach above the monthly open targets 1.3462 & the median-line confluence at 1.3550.

A summary of the DailyFX Speculative Sentiment Index (SSI) shows traders are long USD/CAD- the ratio stands at +1.12 (53% of traders are long)- weak bearish reading
Long positions are 24.7% lower than yesterday and 23.6% below levels seen last week
Short positions are 20.7% higher than yesterday and a full 37.8% above levels seen last week
Open interest is 8.4% lower than yesterday but remains 6.1% above its monthly average
The current dynamic off waning long exposure & open interest suggests retail traders are taking profits here & a flip to net short would suggest a larger shift in sentiment is underway.

Relevant Data Releases