Skip to Content
News & Analysis at your fingertips.

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. See our updated Privacy Policy here.

Free Trading Guides
Subscribe
Please try again
Select

Live Webinar Events

0

Economic Calendar Events

0

Notify me about

Live Webinar Events
Economic Calendar Events

H

High

M

Medium

L

Low
More View More
USD/CAD Extends Bearish Price Series Ahead of US Retail Sales Report

USD/CAD Extends Bearish Price Series Ahead of US Retail Sales Report

What's on this page

Canadian Dollar Talking Points

USD/CAD bounces back from a fresh monthly low (1.2453) as a growing number of Federal Reserve officials strike a hawkish tone, but the exchange rate remains susceptible to a further decline as it extends the series of lower highs and lows from the start of the week.

Advertisement

USD/CAD Extends Bearish Price Series Ahead of US Retail Sales Report

USD/CAD appears to be in the midst of a broader correction as it takes out the December low (1.2606), and the exchange rate may continue to give back the advance from the October low (1.2288) as fresh data prints coming out of the US are anticipated to show a slowdown in economic activity.

Image of DailyFX Economic Calendar for US

The US Retail Sales report is anticipated to show household spending holding flat in December, while the U. of Michigan Confidence survey is expected to reflect a downtick in consumer sentiment, and a batch of dismal data prints may keep USD/CAD under pressure as it encourages the Federal Reserve to delay normalizing monetary policy.

As a result, USD/CAD may continue to depreciate ahead of the next Federal Open Market Committee (FOMC) interest rate decision on January 26 as it fails to defend the monthly opening range, but a further decline in the exchange rate may fuel the recent flip in retail sentiment like the behavior seen during the previous year.

Image of IG Client Sentiment for USD/CAD rate

The IG Client Sentiment report shows 75.89% of traders are currently net-long USD/CAD, with the ratio of traders long to short standing at 3.15 to 1.

The number of traders net-long is 13.09% higher than yesterday and 58.75% higher from last week, while the number of traders net-short is 20.92% lower than yesterday and 16.62% lower from last week. The surge in net-long interest has fueled the tilt in retail sentiment as 65.87% of traders were net-long USD/CAD earlier this week, while the decline in net-short position comes as the exchange rate trades to a fresh monthly low (1.2453).

With that said, the decline from the December high (1.2964) may turn out to be a correction in the broader trend as the FOMC appears to be on track to implement higher interest rates in 2022, but recent price action raises the scope for a further decline in the exchange rate as it extends the series of lower highs and lows from the start of the week.

How to Use IG Client Sentiment in Your Trading
How to Use IG Client Sentiment in Your Trading
Recommended by David Song
Learn More About the IG Client Sentiment Report
Get My Guide

USD/CAD Rate Daily Chart

Image of USD/CAD rate daily chart

Source: Trading View

  • Keep in mind, USD/CAD traded to a fresh 2021 high (1.2964) in December even as the Relative Strength Index (RSI) diverged with price, but the exchange rate appears to have reversed course following the failed attempt to test the December 2020 high (1.3009).
  • USD/CAD has taken out the December low (1.2606) as it failed to defend the monthly opening range, with the recent series of lower highs and lows pushing the exchange rate below the 200-Day SMA (1.2498) for the first time since November.
  • Need a break/close below the 1.2410 (23.6% expansion) to 1.2440 (23.6% expansion) area to bring the 1.2360 (100% expansion) region on the radar, with a break below the October low (1.2288) opening up the 1.2250 (50% expansion) to 1.2260 (38.2%expansion) zone.
  • However, lack of momentum to break/close below the 1.2410 (23.6% expansion) to 1.2440 (23.6% expansion) area may push USD/CAD back towards the Fibonacci overlap around 1.2620 (50% retracement) to 1.2650 (78.6% expansion), with a move above 1.2770 (38.2% expansion opening up 1.2830 (38.2% retracement) to 1.2880 (61.8% expansion) region.
Traits of Successful Traders
Traits of Successful Traders
Recommended by David Song
Traits of Successful Traders
Get My Guide

--- Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong

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

DISCLOSURES