Talking Points:
- USD/CAD Eyes Range Resistance as Canada 1Q GDP Disappoints.
- USDOLLAR Weakness to Persist on Mixed Data, Slowing ISM Manufacturing.
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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).
- 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.
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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% |
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:
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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