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USD/CAD Retail Sentiment in Focus Ahead of Canada Budget

USD/CAD Retail Sentiment in Focus Ahead of Canada Budget

David Song, Strategist

Talking Points:

- USD/CAD Retail Sentiment Hits Fresh Near-Term Extremes Ahead of Canada Budget.

- USDOLLAR Outlook Remains Mired by Waning Bets for Fed Rate-Hikes; August Low in Focus.

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USD/CAD

USD/CAD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Despite the softer-than-expected inflation report out of Canada, USD/CAD stands at risk for a further decline in the days ahead amid the recent series of lower highs & lows, while price & the Relative Strength Index (RSI) retain the bearish formations from earlier this year.
  • With Canada’s budget statement due out on March 22, a meaningful fiscal stimulus package may heighten the appeal of the loonie as it takes pressure off of the Bank of Canada (BoC) to further support the real economy; may see a material shift in the monetary policy outlook should Governor Stephen Poloz show a greater willingness to move away from the easing cycle.
  • Will keep a close eye on the downside targets as USD/CAD continues to search for support, with the next key area of interest coming in around 1.2860 (78.6% retracement) to 1.2831 (October low).
USD/CAD SSI
  • The DailyFX Speculative Sentiment Index (SSI) shows the retail FX crowd remains net-long USD/CAD since February 25 even as the pair slips to a fresh 2016 low, with the ratio hitting fresh near-term extremes as it makes it way towards the +2.00 region.
  • The ratio currently stands at +1.85 as 65% of traders remain long ahead of the weekend, with long positions 7.4% higher from the previous week, while short positions have slipped 10.8% during the same period.

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USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index11888.2811898.4411846.830.1680.01%
USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • USDOLLAR remains vulnerable to further losses as market participants scale back bets for Fed rate-hikes in 2016, but the greenback may face a larger rebound over the near-term as the RSI appears to be turning around ahead of oversold territory.
  • The mixed data prints coming out of the U.S. economy may continue to dampen the appeal of the greenback as the unexpected decline in the U. of Michigan Confidence survey undermines Fed expectations for a ‘consumer-led’ recovery this year; will keep a close eye on the U.S. Durable Goods Orders report on tap for the week ahead as demand for large-ticket items are anticipated to contract 2.8% in February.
  • The break/close below 11,900 (78.6% retracement) raises the risk for a move back towards 11,789 (August low), and we may see former support around 11,951 (38.2% expansion) to 11,965 (23.6% retracement) act as new resistance amid the longer-term bearish formations in price & RSI.

Read More:

US Dollar – Breakdown Continues, Reprieve Ahead?

AUD/USD Post-FOMC Rally at Risk Ahead of Australian Labor Report

Long-term Low in Silver?

Long Term Cyclical Influence Nears for AUD/USD

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--- Written by David Song, Currency Analyst

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

To be added to David's e-mail distribution list, please follow this link.

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