Talking Points:
- USD/CAD Extends Advance Ahead of Canada Retail Sales, Consumer Price Index (CPI).
- USDOLLAR Pares Gains Post-FOMC Minutes as Mixed Data Continues.
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Chart - Created Using FXCM Marketscope 2.0
- USD/CAD stands a risk for a larger advance especially as the pair breaks out of the downward trend from earlier this year and clears near-term resistance around 1.2980 (61.8% retracement) to 1.2990 (23.6% retracement).
- Despite forecasts for an uptick in Canada’s Consumer Price Index (CPI), a slowdown in the core rate of inflation accompanied by a 0.6% decline in Retail Sales may spur further losses for the loonie as it puts increased pressure of the Bank of Canada to retain the highly accommodative policy stance for an extended period of time.
- A closing price above 1.3130 (38.2% retracement) may open up the next topside target around 1.3210 (78.6% expansion) followed by 1.3300 (50% retracement) to 1.3310 (38.2% retracement).
- The DailyFX Speculative Sentiment Index (SSI) shows the retail FX crowd has flipped net-short USD/CAD during the last 24-hours of trade even as the pair pushes to fresh monthly highs.
- The ratio currently sits at -1.07 as 48% of traders are long, with short positions 6.9% higher from the previous week even as open interest stands 2.9% below the monthly average.
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USDOLLAR(Ticker: USDollar):
| Index | Last | High | Low | Daily Change (%) | Daily Range (% of ATR) |
|---|---|---|---|---|---|
| DJ-FXCM Dollar Index | 11949.59 | 11972.52 | 11941.58 | -0.02 | 56.97% |
Chart - Created Using FXCM Marketscope 2.0
- The USDOLLAR has made a more meaningful attempt to test the descending channel from earlier this year as the Federal Open Market Committee (FOMC) Minutes boosts expectations for a June rate-hike, with Fed Funds Futures now showing a 30% probability for higher borrowing-costs next month.
- Even though a growing number of Fed officials are showing a greater willingness to further normalize monetary policy, the ongoing batch of mixed data prints coming out of the U.S. economy accompanied by the weakness in global growth may encourage the central bank to retain its current policy going into the summer months as ‘survey-based measures of longer-run inflation expectations were little changed, on balance, in recent months, while market-based measures of inflation compensation were still low.’
- Following the FOMC Minutes, a break/close above the Fibonacci overlap around 11,951 (38.2% expansion) to 11,965 (23.6% retracement) may spark a further advance in the USDOLLAR, with the next topside region of interest coming in around 12,049 (78.6% retracement) to 12,057 (23.6% expansion).
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Read More:
Gold Bulls Look to CPI, Fed Minutes for Solace
DailyFX Technical Focus: Short Term S&P and Gold Analysis
USD/CAD Technical Analysis: Time For Bulls To Prove Their Worth
--- Written by David Song, Currency Analyst
To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.
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