USD/CAD Teeters on the Precipice Ahead of Jackson Hole

2017-08-24 16:34:00

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USD/CAD continues to slide towards monthly open support ahead of Jackson Hole
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USD/CAD Daily Chart

Technical Outlook: USD/CAD failed an attempted breach above the 1.2723/39 resistance region last week with the decline taking price back below slope support extending off the April low (purple). The risk remains lower while below daily-reversal resistance at 1.2617(8/16-close) but don’t get too comfortable yet- prices are approaching monthly open support heading into key U.S. event risk tomorrow.

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USD/CAD 120min

Notes: A closer look at price action shows the Loonie trading within the confines of a descending pitchfork formation with prices trading just above the median-line into the open of US trade. Interim support is seen at 1.2491-1.2501 where the 100% extension of the decline converges on the 78.6% retracement of the late-July advance. A break below this level would be needed to mark the next leg lower in the pair with such a scenario targeting 1.2413/15 backed by 1.2384.

Interim resistance stands at 1.2553 with a breach above the objective weekly opening-range highs at 1.2606 needed to validate a near-term reversal in the pair. Broader bearish in validation is now lowered to 1.23652.

Bottom line: from a trading standpoint, I would be looking immediately lower for an opportunity get long-targeting the upper parallel. Ultimately I’d look to get back on the short-side heading into September trade. Added caution is warranted heading into the close of the week with Federal Reserve Chair Janet Yellen’s remarks at the annual Jackson Hole Economic Symposium tomorrow likely to fuel increased volatility in the dollar crosses. Stay nimble.

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A summary of IG Client Sentiment shows traders are net-long USDCAD- the ratio stands at +1.73 (63.4% of traders are long) –bearish reading
Retail has remained net-long since Jun 7th; price has moved 6.7% lower since then
Long positions are 1.6% higher than yesterday but7.2% lower from last week
Short positions are 5.6% higher than yesterday and 29.6% higher 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. That said, traders are less net-long than yesterday and compared with last week and the recent changes in positioning warn that the current USDCAD price trend may soon reverse higher despite the fact traders remain net-long.

See how shifts in USDCAD retail positioning are impacting trend- Click here to learn more about sentiment!

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