News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Bullish
Oil - US Crude
Mixed
Wall Street
Mixed
Gold
Bullish
GBP/USD
Bearish
USD/JPY
Mixed
More View more
Real Time News
  • Traders in the Euro have a big decision to make this weekend: if EUR/USD hits 1.20, will it continue to advance, consolidate or fall back? Get your $EURUSD market update from @MartinSEssex here:https://t.co/8hAhguZcEA https://t.co/kwtatozp3z
  • The bullish engulfing candle is one of the forex market's most clear-cut price action signals for reversals and continuation. Learn more about this price action trading signal here: https://t.co/Yg6ecRZZNr https://t.co/9SdceNYUEK
  • The bull flag pattern is a great pattern to add to a forex trader's technical arsenal. Explosive moves are often associated with the bull flag. Learn more about the bull flag pattern here: https://t.co/yOEvLjKnct https://t.co/imv2PnapzH
  • Defensive stocks have proven critically important when navigating stock market volatility. Find out what are the most defensive stocks here:https://t.co/TMcbMALtbw https://t.co/mmldxxEtsc
  • Dollar Index has broken major uptrend support and risks accelerated losses into the December open. Get your $USD technical analysis from @MBForex here:https://t.co/Txo8l8S1f1 https://t.co/YLVzP95JH8
  • The MACD is an indicator that uses exponential moving averages (EMA) to determine trend strength along with entry points based on crossovers. Find out how you can use the MACD as a buy/sell signal here: https://t.co/qxnP99uqTQ https://t.co/tGVqSZ2zK3
  • Support and resistance are the cornerstone of technical analysis, making it the foundation that you build your knowledge on. Build a stronger foundation here: https://t.co/yXLaRpl90I https://t.co/reMoYpqkQO
  • Struggling to define key levels? Floor-Trader Pivots assist traders in identifying areas in a chart where price is likely to approach and can be used to set appropriate targets, while effectively managing risk. Learn how to use this indicator here: https://t.co/Ye4m1FMKUW https://t.co/sqeRL7Rf7u
  • Cyclical and non-cyclical stocks can help diversify a trader’s equity portfolio. Get your guide to understanding these stocks here: https://t.co/h7BKTd2J8N https://t.co/ukOW0dWJxf
  • Beautifully put. https://t.co/0fBsmUH6Pb
Oil Prices May be Creating an Even Larger Problem for Canada

Oil Prices May be Creating an Even Larger Problem for Canada

2015-11-07 02:39:00
James Stanley, Strategist
Share:
Oil Prices May be Creating an Even Larger Problem for CanadaOil Prices May be Creating an Even Larger Problem for Canada

Fundamental Forecast for CAD: Bearish

  • In our previous forecast we looked at the prospect of improving fundamental data being offset by a deeper drop in Oil prices for the Canadian economy; and to accentuate this theme, we’ve seen a massively weak CAD despite better-than-expected employment numbers.
  • USD/CAD has continued its ascent, and retail traders have stuck to their bearish stance in the pair: This could lead to additional gains in USD/CAD, as SSI is a contrarian positioning indicator.
  • To get real-time updates on positioning changes in USD/CAD, applied directly on to your charts, you can download the SSI Snapshots indicator completely free-of-charge.

Just last week we reiterated our bearish forecast for the Canadian Dollar on the basis of expected weakness in Oil prices. And last week, that is exactly what we got. But we did also see some positive information on the Canadian economy with a better than expected jobs report on Friday morning to finish off the week. The unemployment rate for the Canadian economy dropped to 7% versus an expectation of 7.1% as 44.4k jobs were added to Canadian payrolls against an expectation for a 10k increase. But looking inside of the numbers will highlight that this isn’t really as bullish as it may first appear, as 32k of those jobs were temporary positions related to the recent Canadian election.

While this is a positive that meshes nicely with the recent uptick in GDP for Canada that may, in fact, see the country grow out of ‘recession territory’ at their next quarterly GDP-print, as we posited in our most recent CAD forecast, a larger driver in the currency (and hence, the economy) is the price of Oil. Drooping Oil prices were largely to blame for the country entering ‘technical recession’ category only two months ago, but as prices have continued to drive lower, the fear is that the follow-through effect could bring more pain for the Canadian economy in the coming months before matters improve. There is a lag to this impact because it takes time for companies to respond to pressures in commodity prices and, in turn, for this change in the macro and micro-economic data to appear. July was a brutal month for Crude, as we saw prices drop from over $59 to below $47, and we may not have seen this impact fully filter into Canadian numbers just yet, and this could bring continued weakness into the CAD.

Data for the coming week is rather light; with Canadian housing numbers on Monday followed by BoC commentary on Tuesday and Thursday from Council Member Wilkins. But perhaps more advantageously, traders could tilt their direction to the expected continuation in divergence between the Canadian economy and their southern neighbors in the United States. Friday’s NFP report showed a blowout print on the American jobs front, and this has raised hopes for a December rate hike out of the Federal Reserve. So while near-term direction on the Canadian Dollar may be slightly opaque due to a lack of relevant data and the competing forces of improving econ data while oil prices fall further, traders can look at this as a divergence-play by selling the Canadian Dollar against its US-counterpart.

From a technical perspective, this was a big week for USD/CAD as we’re approximately 245 pips higher than last week’s close, and we’re a mere ~150 pips off of the 11-year high in the pair (11-year low for the Canadian Dollar). With little data on the docket for next week, traders may be able to buy a retracement in the pair (selling the CAD), should support materialize at 1.3250 (major psychological level), or 1.3150 (prior price action swing-low). This could open the door for targets at 1.3400, 1.3450 (the previous-high), and then 1.3500 (major psychological level).

Should 1.3500 get hit in USD/CAD, then we’re trading at new highs again, and this is where traders can look to scale-out of positions as even more new highs print in the pair.

The forecast remains bearish on the Canadian Dollar moving forward.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES