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USD/CAD Risks Further Losses Despite Cautious BoC

USD/CAD Risks Further Losses Despite Cautious BoC

David Song,

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.

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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).
  • 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.

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USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index11799.0411838.3711787.86-0.3088.64%
USDOLLAR 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).

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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

Big Test For Spoos, Big Test For the Markets

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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.