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USD/CAD Bearish Formation to Remain in Play on Upbeat BoC

USD/CAD Bearish Formation to Remain in Play on Upbeat BoC

David Song,

Talking Points:

- USD/CAD Retains Bearish Formation Ahead of Bank of Canada (BoC) Rate-Decision.

- USDOLLAR Weakness Persists Ahead of Retail Sales Report, Consumer Price Index (CPI).

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USD/CAD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • USD/CAD remains at risk for a further decline as the pair largely preserves the downward trend from earlier this year, while the Relative Strength Index (RSI) threatens the rebound from the previous month; failure to retain the near-term pattern may spur another move lower as the dollar-loonie appears to be stuck within a descending triangle formation.
  • With Canada Employment expanding 40.6K in March, the Bank of Canada (BoC) is likely to retain its current policy at the interest-rate decision for the week ahead, but the fresh batch of central bank rhetoric may heighten the appeal of the Canadian dollar should Governor Stephen Poloz adopt an improved outlook for the region.
  • Still waiting for a break/close below 1.2930 (61.8% expansion) to favor a move lower, with the next region of interest coming in around the 1.2831 (October low), followed by 1.2740 (50% expansion).
  • The DailyFX Speculative Sentiment Index (SSI) shows the retail FX crowd remains net-long USD/CAD since February 25, with the ratio hitting a near-term extreme in March as it climbed just shy of +2.00.
  • The ratio currently stands at +1.04 as 51% of traders are long, with long positions 17.4% lower from the previous week, while short positions have jumped 22.8% during the same period.

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USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index11884.9111919.3511871.02-0.1977.42%
USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • The USDOLLAR may continue to face range-bound prices ahead of the key data prints scheduled for the week ahead amid the mixed rhetoric from Fed officials; will continue to watch the downside risk as price & the RSI preserve the bearish trend from earlier this year.
  • A rebound in U.S. Retail Sales accompanied by a sticky reading for the core Consumer Price Index (CPI) may prop up the greenback and put increased pressure on the Federal Open Market Committee (FOMC) to normalize monetary policy sooner rather than later especially as the economy approaches ‘full-employment.’
  • Will keep a close eye on the near-term range amid the failed attempts to push back above 11,951 (38.2% expansion) to 11,965 (23.6% retracement), with near-term support coming in around 11,826 (61.8% expansion) to 11,843 (38.2% retracement).
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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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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.