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USD/CAD FX Sentiment Approaches Extreme Ahead of Canada Employment

USD/CAD FX Sentiment Approaches Extreme Ahead of Canada Employment

2016-06-09 17:25:00
David Song, Strategist
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Talking Points:

- USD/CAD Retail Sentiment Approaches Extreme Ahead of Canada Employment Report.

- USDOLLAR Rebound Vulnerable to Waning Consumer Confidence, Subdued Inflation Expectations.

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

  • USD/CAD may continue to give back the rebound from the May low (1.2460) as the pair fails to retain the range-bound price action carried over from the previous month and appears to be carving a downward trending channel; will look for opportunities to sell-bounces in the dollar-loonie amid the recent series of lower highs & lows in the exchange rate.
  • Even though the Bank of Canada (BoC) retains a cautious outlook and warns about the rise in household debt, may see the central bank largely endorse a wait-and-see approach throughout 2016 as Governor Stephen Poloz and Co. appear to be gradually moving away from its easing cycle.
  • May see a near-term rebound in USD/CAD as it appears to be catching support around 1.2620 (78.6% retracement) to 1.2650 (50% retracement), but a meaningful pickup in Canada Employment may open up the next downside target 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 remains net-long USD/CAD since May 25, with the ratio hitting an extreme reading in late-April at it climbed above the +2.00 mark.
  • The ratio currently sits at +1.62 as 62% of traders are long, with long positions 23.5% higher from the previous week, while open interest stands 3.0% above 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

11842.69

11847.58

11802.52

0.19

102.78%

USD/CAD FX Sentiment Approaches Extreme Ahead of Canada EmploymentUSDOLLAR Daily Chart

Chart - Created by David Song

  • The near-term rebound in the USDOLLAR may be short-lived as the greenback struggles to get back above the Fibonacci overlap around 11,836 (61.8% retracement) to 11,843 (38.2% retracement), while Fed Funds Futures continue to highlight a less than 10% probability for a June Fed rate-hike amid the mixed data prints coming out of the economy.
  • A downtick in the preliminary U. of Michigan Confidence survey may further dampen the appeal of the greenback as it undermines Fed expectations for a ‘consumer-led’ recovery in 2016 and may encourage the Federal Open Market Committee (FOMC) to further delay the normalization cycle as 12-month inflation expectations stand at the lowest reading since September 2010.
  • Failure to close back above 11,836 (61.8% retracement) to 11,843 (38.2% retracement) may open up the next downside target coming in around 11,745 (50% retracement) to 11,759 (23.6% retracement).
USDOLLAR Daily Chart

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Read More:

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S&P 500: Shrugs off Abysmal NFPs, Undergoing Consolidation Phase

EUR/USD Long Term Bull Trend Holding Support

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

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