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- Prices respond to long-term Fibonacci support - broader outlook bearish
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USD/CAD Daily Chart
Technical Outlook: USD/CAD reversed sharply today off confluence support at 1.2415 (low was 1.2413) – this level is defined by a long-term 61.8% ext of the broader decline off the 2016 high and converges on a parallel support extending off the 9/21 swing low (red). Note that daily momentum is also attempting to break back above the 30-mark and highlights the risk for a near-term recovery in price.
Initial resistance is eyed at the medina-line (currently around the 1.26-handle) and is backed by 1.2723/39. A breach there would be needed to suggest a more significant recovery is underway. If price breaks lower from here, there’s not really much until the 50% retracement at 1.2056.
Learn more about Pitchfork & Median-line formations in Michael’s three-part trading series
USD/CAD 240min Chart
Notes: Price has continued to trade within the confines of this near-term descending slope formation with former slope-support further highlighting near-term resistance at Friday’s high ~ 1.2609. Look for a reaction there with a breach higher targeting 1.2680 & confluence resistance at 1.2739 (area of interest for possible short-entries).
From a trading standpoint, I’ll be looking for a breach of the weekly opening range high to validate this near-term reversal in price targeting the highlighted resistance objectives. Keep in mind we have the release of both U.S. & Canadian GDP figures tomorrow and the releases is likely to fuel increased volatility in their respective crosses.
- A summary of IG Client Sentimentshows traders are net-long USD/CAD- the ratio stands at +2.86 (74.1% of traders are long) – bearishreading
- Retail traders have been net-long since June 7th- Price has moved 7.2% lower since
- Long positions are 17.9% lower than yesterday but 8.8% higher from last week
- Short positions are 3.3% lower from yesterday and 0.4% lower from last week
- We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USD/CAD prices may continue to fall. That said, retail is less net-long than yesterday but more net-long from last week and the combination of current positioning and recent changes gives us a further mixed near-term trading bias from a sentiment standpoint.
What to look for in USD/CAD retail positioning - Click here to learn more about sentiment!
Relevant Data Releases
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Other Setups in Play:
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- EUR/JPY: Continuation or Correction- Range Break to Offer Opportunity
- Strategy Webinar: Markets at Risk for Trend Exhaustion Ahead of FOMC, U.S. GDP
- Written by Michael Boutros, Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex or contact him at email@example.com.