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USD/CAD Bear-Flag Takes Shape Ahead of Canada Budget

USD/CAD Bear-Flag Takes Shape Ahead of Canada Budget

David Song, Strategist

Talking Points:

- USD/CAD Carves Bear-Flag; Retail Sentiment Narrows From Extreme 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

  • USD/CAD stands at risk for a further decline as a bear-flag formation takes shape, while the Relative Strength Index (RSI) preserves the downward trend carried over from the previous month; will continue to watch the downside targets as the pair breaks down from the bullish trend from back in 2014.
  • With Canada’s budget statement expected to highlight a fiscal stimulus package, an expansion in government spending may spur a material shift in the monetary policy outlook as it raises the Bank of Canada’s (BoC) to move away from its easing cycle.
  • With a continuation pattern in play, with the next downside area of interest coming in around 1.2800 (38.2% expansion) 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, with the ratio hitting fresh near-term extremes during the previous week amid the move towards +2.00.
  • Retail sentiment has narrowed from the recent extremes, with the ratio currently sitting at +1.46 as 59% of traders remain long, while open interest stands 2.4% below the monthly average ahead of the Easter holiday.

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USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index11935.7811952.5811910.990.0764.43%
USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • USDOLLAR continues to carve a near-term series of higher highs & lows despite the mixed data prints coming out of the world’s largest economy, but the rebound may be a mere correction as price & RSI retain the bearish formations from earlier this year.
  • Comments from Chicago Fed President Charles Evans and Philadelphia Fed President Patrick Harker may have a limited impact on near-term price action as they will serve on the 2017 Federal Open Market Committee (FOMC), but will keep a close eye on St. Louis Fed President James Bullard as he remains one of the bigger hawks amongst the 2016 voting-members.
  • Will keep a close eye on the former support zone around 11,951 (38.2% expansion) to 11,965 (23.6% retracement) for new resistance, but a break/close above the region may open up a larger rebound into 12,050 (78.6% retracement) to 12,082 (61.8% expansion).

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

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