We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Mixed
GBP/USD
Bullish
USD/JPY
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Mixed
Bitcoin
Bearish
More View more
Real Time News
  • The latest UK General Election opinion polls continue to show the Conservative Party holding a strong lead over Labour and point to Boris Johnson winning a working majority in Parliament. Get your $GBPUSD market update from @nickcawley1 here: https://t.co/qF04EOUWkI https://t.co/LNl4bXbnpp
  • Recent polls have put Conservatives ahead of Labour and given a boost to $GBP. Get your #Brexit update from @ZabelinDimitri here: https://t.co/l2n53C0cYY https://t.co/oTWfXkaDDt
  • What are the truths and myths of #forex trading? Find out from @DailyFX analysts here: https://t.co/uF75VPzstr #FOMOintrading https://t.co/xeromAGqqx
  • Macro data from around the world have long attested to the urgent need for a trade settlement between the US and China. Increasingly the corporate numbers are saying the same. Get your market update from @DavidCottleFX here:https://t.co/Qon7QUO80c https://t.co/rCOG78QQ2M
  • #Gold prices may fall while the US Dollar gains even as economic policies championed by the Trump administration invite inflation. Get your market update from @IlyaSpivak here: https://t.co/4lHhHsby56 $XAUUSD https://t.co/JmZxckVHdS
  • Cable (GBP/USD) remains just off its seven-month high print around 1.3165 as traders start to move to the side lines ahead of next Thursday’s General Election vote. Get your $GBPUSD market update from @nickcawley1 here: https://t.co/CpCh13J9ZH #Brexit https://t.co/PIh6WUqbsK
  • (Weekly Technical Outlook) GBP/USD, EUR/GBP, GBP/JPY, GBP/CAD Outlook as UK Election Looms $GBPUSD $EURGBP $GBPJPY #UKelection2019 - https://www.dailyfx.com/forex/technical/article/fx_technical_weekly/2019/12/07/GBPUSD-EURGBP-GBPJPY-GBPCAD-Outlook-as-UK-Election-Looms.html?CHID=9&QPID=917702 https://t.co/iuILHYczJ7
  • Why do you require consistency in trading and why does it matter? Find out: https://t.co/WlEFlluGfZ #tradingstyle https://t.co/TkMtJQKatx
  • By issuing debt denominated in $USD, China is making a long-term bet that it will be cheaper to pay back its loans over time in the US Dollar; it believes the value of the US Dollar will fall. Get your market update from @CVecchioFX here:https://t.co/5GO9UrvO4y https://t.co/xV9urXXf48
  • What are some risk trading management techniques? Find out: https://t.co/RShdlDz9RA #tradingstyle https://t.co/M3ASPIHAep
USD/CAD Forecast: Bear-Flag Take Shape Amid Less-Hawkish Fed Rhetoric

USD/CAD Forecast: Bear-Flag Take Shape Amid Less-Hawkish Fed Rhetoric

2019-01-16 16:00:00
David Song, Currency Strategist
Share:

Canadian Dollar Talking Points

USD/CAD holds a narrow range following the failed attempt to test the December-low (1.3160), but recent price action raises the risk for a further decline in the exchange as a bear-flag appears to be taking shape.

Image of daily change for major currencies

USD/CAD Bear-Flag Continues to Take Shape Amid Cautious Fed Rhetoric

Image of daily change for usdcad rate

The recent rebound in USD/CAD appears to be sputtering as a growing number of Federal Reserve officials adopt a less-hawkish outlook for monetary policy, and it seems as though the central bank will endorse a wait-and-see approach at the next interest rate decision on January 30 especially as the government shutdown dampens the outlook for the U.S. economy.

Recent comments from Kansas City Fed President Esther George suggest the central bank will stay on hold throughout the first-quarter of the year as the 2019-voting member on the Federal Open Market Committee (FOMC) warns that ‘it might be a good time to pause our interest rate normalization, study the incoming evidence and data, and verify our current location.’

Image of fed fund futures

Moreover, Dallas Fed President Robert Kaplan appears to be joining his colleagues, stating that it could be a ‘matter of months, not weeks’ before the FOMC adjusts policy, and the material change in Fed rhetoric may continue to sap the appeal of the U.S. dollar as market participants scale back bets for an imminent rate-hike. In turn, Fed Fund Futures may continue to show limited bets for higher borrowing-costs, but it remains to be seen if the FOMC will scale back the $50B/month in quantitative tightening (QT) asChairman Jerome Powell sees the balance sheet to returning to a ‘more normal level.’

With that said, USD/CAD may continue to retrace the decline from the 2017-high (1.3793) as the Fed gradually moves towards a less-accommodative stance, but the recent pickup in market volatility appears to be spurring a shift in retail interest as traders flip net-long for the first time since September.

Image of IG client sentiment for usdcad

The IG Client Sentiment Report shows48.4%of traders are now net-long USD/CAD compared to 50.7% earlier this week, with the ratio of traders long to short at 1.07 to 1. The number of traders net-long is 9.1% lower than yesterday and 1.3% higher from last week, while the number of traders net-short is 2.0% lower than yesterday and 9.8% lower from last week.

Market participation seems to be waning ahead of Canada’s Consumer Price Index (CPI), with the updates anticipated to show the headline reading for inflation holding steady at 1.7% per annum in December, but the recent accumulation in net-long interest foreshadows a broader shift in market behavior even though price and the Relative Strength Index (RSI) snap the bullish formations carried over from late-2018.

With that said, the USD/CAD correction from the December-high (1.3665) may continue to materialize before the broader trend takes hold, with the downside targets still on the radar as a bear-flag appears to be taking shape.Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups.

USD/CAD Daily Chart

Image of usdcad daily chart
  • Keep in mind, broader outlook for USD/CAD remains constructive following the break of the June-high (1.3386), but the failed attempts to close above the 1.3630 (38.2% retracement) to 1.3660 (78.6% expansion) region raises the risk for a larger correction as both price & the RSI snap the bullish formations from October.
  • String of failed attempts to push back above the 1.3290 (61.8% expansion) to 1.3310 (50% retracement) region brings the downside targets on the radar as a bear-flag formation takes shape.
  • A short-term continuation pattern would raise the risk for a move back towards 1.3130 (61.8% retracement), with the next region of interest coming in around 1.2980 (61.8% retracement) to 1.3030 (50% expansion).

Additional Trading Resources

Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader’ series on how to effectively use leverage along with other best practices that any trader can follow.

Want to know what other currency pairs the DailyFX team is watching? Download and review the Top Trading Opportunities for 2019.

--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.