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USD/CAD Eyes Range Resistance as 1Q Canada GDP Disappoints

USD/CAD Eyes Range Resistance as 1Q Canada GDP Disappoints

2016-05-31 15:40:00
David Song, Strategist
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Talking Points:

- USD/CAD Eyes Range Resistance as Canada 1Q GDP Disappoints.

- USDOLLAR Weakness to Persist on Mixed Data, Slowing ISM Manufacturing.

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 by David Song

  • The Canadian dollar struggles to hold its ground following the weaker-than-expected 1Q Gross Domestic Product (GDP) report, with USD/CAD at risk of working its way back towards the top of its recent range following the failed attempt to test the April high (1.3218).
  • Even though the long-term outlook for USD/CAD remains tilted to the upside, the Canadian dollar may outperform over the coming months as the Bank of Canada (BoC) endorses a wait-and-see approach and appears to be gradually moving away from its easing cycle.
  • USD/CAD may remain capped around 1.3210 (78.6% expansion) amid the failed run at the April high (1.3218), with a break/close below 1.2930 (61.8% expansion) to 1.2980 (61.8% retracement) raising the risk for a move back towards 1.2740 (50% expansion).
USD/CAD SSI
  • The DailyFX Speculative Sentiment Index (SSI) shows the retail FX crowd remains net-long USD/CAD since May 25, with the ratio hitting an extreme reading back in April at it climbed above the +2.00 mark.
  • The ratio currently sits at +1.31 as 57% of traders are long, with long positions 20.5% higher from the previous week even as open interest stands 1.9% below the monthly average.

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

USDOLLAR(Ticker: USDollar):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

US Dollar Index

11980.87

11987.04

11957.32

-0.04

77.42%

USD/CAD Eyes Range Resistance as 1Q Canada GDP Disappoints USDOLLAR Daily Chart

Chart - Created by David Song

  • Despite the pickup in U.S. Personal Spending, the USDOLLAR struggles to hold its ground amid the mixed batch of data, with the Federal Open Market Committee (FOMC) largely anticipated to retain its current policy at the next interest-rate decision on June 15 as wage/price growth remains subdued.
  • Even though the FOMC appears to be on course to further normalize monetary policy in 2016, Fed Funds Futures continue to show less than a 40% probability for a rate-hike in June, with the greenback at risk of facing headwinds over the next 24-hours of trade as the ISM Manufacturing survey is anticipated to slow to 50.3 from 50.8 in April.
  • Nevertheless, the USDOLLAR may try to mount a larger recovery as it breaks out of its recent range, with the next topside region of interest coming around 12,049 (78.6% retracement) to 12,057, but the lackluster developments coming out of the U.S. economy may spur further losses for the greenback with near-term support coming in around 11,898 (50% retracement).
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Read More:

USD/CHF Rally? It Just MAY

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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