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USD/CAD Risks Further Losses on Failed Test of Opening Monthly Range

USD/CAD Risks Further Losses on Failed Test of Opening Monthly Range

David Song,

Talking Points:

- USD/CAD Fails to Test Opening Monthly Range; Canada GDP Report in Focus.

- USDOLLAR Pullback to Generate Continuation Pattern?

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USD/CAD Daily Chart

Chart - Created by David Song

  • USD/CAD may works its way back towards the bottom of its recent as it fails to break the opening monthly range, with the pair largely capped around 1.3130 (38.2% retracement); will continue to watch the downside risk as price & the Relative Strength Index (RSI) preserve the bearish formations from earlier this year.
  • With Canada’s Gross Domestic Product (GDP) report anticipated to show the economy growing an annualized 1.4% in April, a meaningful pickup in the growth rate may encourage the Bank of Canada (BoC) to gradually move away from its easing cycle as Governor Stephen Poloz softens the dovish outlook for monetary policy and turns upbeat on the economy.
  • Break/close below the Fibonacci overlap around 1.2930 (61.8% expansion) to 1.2980 (61.8% retracement) may open up the next downside region of interest coming in around 1.2620 (50% retracement) to 1.2650 (50% retracement).
  • The DailyFX Speculative Sentiment Index (SSI) shows a bit of back and forth in retail positioning heading into the end of the month, with the FX crowd flipping back net-long USD/CAD on June 28.
  • The ratio currently sits at +1.09 as 52% of traders are long, with long positions 15.2% lower from the previous week as open interest stands 8.8% 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):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
US Dollar Index11958.7312012.3311948.99-0.4288.46%
USDOLLAR Daily Chart

Chart - Created by David Song

  • The USDOLLAR may face a larger pullback going into the end of month/quarter as market participants continue to show a limited reaction to U.S. data prints, with Fed Funds Futures now showing narrowing bets for a 2016 Fed rate-hike; may ultimately turn into a bull-flag (continuation) formation as the greenback breaks out of the downward trend from earlier this year.
  • Despite the stickiness in the core Personal Consumption Expenditure (PCE), the Fed’s preferred gauge for inflation, the ongoing weakness in household earnings may encourage another unanimous vote to preserve the current policy at the next Federal Open Market Committee (FOMC) interest-rate decision on July 27 as central bank officials cautious outlook for the U.S. economy.
  • Need a break/close above the Fibonacci overlap around 12,049 (78.6% retracement) to 12,064 (61.8% retracement) to open up the next topside target around 12,170 (78.6% retracement) to 12,176 (78.6% expansion).
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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.