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CAD Struggles as Oil Prices Slip- AUD to Face 3Q CPI Report

CAD Struggles as Oil Prices Slip- AUD to Face 3Q CPI Report

Talking Points:

- USD/CAD Retail Crowd Remains Net-Short Even as Pair Presses Fresh Weekly High.

- AUD/USD to Face Greater Losses on Soft Australia Consumer Price Index (CPI) Report.

- USDOLLAR Posts Inside-Day Ahead of U.S. Durable Goods Orders Report.

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USD/CAD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • The near-term advance in USD/CAD appears to be accompanied by a decline in US Oil; may see this dynamic continue to materialize over the remainder of the year especially as the Bank of Canada (BoC) largely endorses a wait-and-see approach.
  • The deviating paths for monetary policy encourages a long-term bullish outlook for USD/CAD, but waiting for the Relative Strength Index (RSI) to breakout of the bearish formation from back in July for conviction/confirmation for a larger advance in the exchange rate.
  • DailyFX Speculative Sentiment Index (SSI) shows retail crowd has flipped net-short USD/CAD on October 23, with the ratio slipping to -1.19 as 46% of traders are long.


AUD/USD Daily Chart
  • AUD/USD may mount a near-term rebound as market participants anticipate Australia’s Consumer Price Index (CPI) to increase an annualized 1.7% in the third-quarter following the 1.5% expansion during the three-months through June.
  • An uptick in the headline print accompanied by a pickup in the core rate of inflation may heighten the appeal of the aussie and spur a test of the monthly high (0.7381) as it raises the Reserve Bank of Australia’s (RBA) scope to conclude its easing cycle.
  • However, as the bullish RSI formation comes under pressure, a dismal CPI print may spur a break of near-term support around 0.7180 (61.8% retracement), with the next downside region of interest coming in around 0.7130 (23.6% retracement).

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USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index12030.4412034.9112004.550.0760.61%
USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Despite the ongoing mixed batch of data coming out of the U.S. economy, the Dow Jones-FXCM U.S. Dollar pares the decline from earlier this week ahead of the Federal Open Market Committee’s (FOMC) rate decision, with the central bank widely anticipated to retain its current policy.
  • The Fed may keep the door open to raise the benchmark interest rate at the December 16 interest rate announcement, but another 9-1 split within the committee may highlight a more delayed normalization cycle as central bank officials look for a further improvement in the real economy.
  • May see the USDOLLAR consolidate below 12,049 (78.6% retracement) to 12,082 (61.8% expansion) ahead of the Fed, with a break/close above the key region opening up the next topside target around 12,176 (78.6% expansion).

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--- Written by David Song, Currency Analyst

To contact David, e-mail Follow me on Twitter at @DavidJSong.

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