USD/CAD Breakdown Takes a Reprieve- Rebound to Offer Opportunity
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- USD/CAD approaching near-term support targets- Rebound to offer opportunity
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Technical Outlook:USDCAD broke below key support highlighted last month at 1.3141/45 with the decline marking fresh yearly lows. The immediate short-bias is at risk heading into key support at 1.2883/90 to start off the week / month with the broader focus still weighted to the downside while below the highlighted slope confluence around 1.3060s.
Notes: A closer look at the 240min chart sees the pair trading within the confines of a well-defined descending pitchfork formation with price rebounding off parallel support into the open of the week. The focus range for now is 1.2883 – 1.3027 – Look for the break to validate our near-term directional bias with a breach higher to mark a correction before resumption of the broader downtrend.
From a trading standpoint, I’m looking for a reaction at the median-line with a break of the lows targeting 1.2832 backed by 1.2746. Added caution is warranted heading into key event risk on Friday with the release of both the U.S. Non-Farm Payroll and Canada employment data likely to fuel increased volatility in the cross.
- A summary of IG Client Sentiment shows traders are net-long USDCAD- the ratio stands at +2.54 (71.8% of traders are long) - bearish reading
- Retail has been net-long since June 7th; price has moved 3.8% lower since then
- Long positions are 7.1% lower than yesterday but 44.6% higher from last week
- Short positions are 29.0% higher than yesterday but9.2% lower from last week
- We typically take a contrarian view to crowd sentiment,and the fact traders are net-long suggests USDCAD prices may continue to fall. Positioning is less net-long than yesterday but more net-long from last week and the combination of current sentiment and recent changes gives us a further mixed USDCAD trading bias and highlights the risk for a near-term recovery.
See how shifts in USDCAD retail positioning are effecting market trends- Click here to learn more!
Relevant Data Releases
Other Setups in Play:
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- Written by Michael Boutros, Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex or contact him at email@example.com.
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.