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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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).
- 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):
| Index | Last | High | Low | Daily Change (%) | Daily Range (% of ATR) |
|---|---|---|---|---|---|
| DJ-FXCM Dollar Index | 11935.78 | 11952.58 | 11910.99 | 0.07 | 64.43% |
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 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.
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