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USD/CAD Risks Further Losses Despite Cautious BoC

USD/CAD Risks Further Losses Despite Cautious BoC

2016-04-19 17:02:00
David Song, Strategist
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Talking Points:

- USD/CAD Risks Further Losses Despite Cautious Bank of Canada (BoC) Testimony.

- USDOLLAR Downside Targets Remain Favored as U.S. Data Prints Disappoint.

Avoid the pitfalls of trading by steering clear of classic mistakes. Review these principles in the "Traits of Successful Traders" series.

USD/CAD

USD/CAD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • USD/CAD stands at risk for further losses as the pair largely preserves the downward trend from earlier this year, while the Relative Strength Index (RSI) flirts with oversold territory; break below 30 in the oscillator may highlight a pickup in the bearish momentum.
  • Even though the Bank of Canada (BoC) warns that there remains ‘plenty of excess capacity,’ Governor Stephen Poloz may endorse a wait-and-see approach throughout 2016 as the central bank head argues monetary policy will have the ‘least impact’ when rates are near zero.
  • USD/CAD may continue to mark fresh monthly lows over the days ahead, with a break/close below 1.2620 (50% retracement) opening up the next downside region of interest coming in around 1.2510 (78.6% retracement) to 1.2550 (38.2% expansion).
USD/CAD SSI
  • The DailyFX Speculative Sentiment Index (SSI) shows the retail FX crowd has flipped back net-long USD/CAD on April 8, with the ratio hitting an extreme reading earlier this month as the ratio spiked above +2.00.
  • The ratio currently stands at +1.94 as 66% of traders are currently long, with short positions 3.0% higher from the previous week, while opening interest stands 4.2% above the monthly average.

Why and how do we use the SSI in trading? View our video and download the free indicator here

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USDOLLAR(Ticker: USDollar):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

11799.04

11838.37

11787.86

-0.30

88.64%

USD/CAD Risks Further Losses Despite Cautious BoCUSDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • The USDOLLAR remains vulnerable to further losses as the dismal Housing Starts & Building Permits report dampens the outlook for growth and inflation, which may encourage the Federal Reserve to further delay its normalization cycle.
  • Signs of a slowing recovery may continue to drag on interest rate expectations ahead of the Federal Open Market Committee’s (FOMC) April 27 interest-rate decision especially as Chair Janet Yellen appears to be in no rush to implement higher borrowing-costs.
  • A closing price below 11,826 (61.8% expansion) raises the risk of seeing a move into the next downside region of interest around 11,745 (50% retracement) to 11,759 (23.6% retracement).
USD/CAD Risks Further Losses Despite Cautious BoC

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Read More:

US DOLLAR Technical Analysis: Retesting 2016 Lows

EUR/JPY Technical Analysis: The Negative Rate Trend Line is Back

EUR/USD and USD/CHF Outside Weeks at Well-Defined Levels

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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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