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USD/CAD Levels to Watch in US Trading Hours, Crude Inventories Ahead

USD/CAD Levels to Watch in US Trading Hours, Crude Inventories Ahead

2016-07-20 11:33:00
Oded Shimoni, Junior Currency Analyst
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Talking Points:

- USD/CAD trading higher for the fourth consecutive day at the time of writing

- A quiet economic calendar puts the focus on Crude Oil Inventories for possible volatility

- GSI is a powerful big data indicator that can help you determine whether short-term trends will continue or reverse

The USD/CAD is pushing higher heading into US trading hours, even though “risk on” sentiment seems to be the order of the day following Bank of England comments that seemed to have slightly downplayed Brexit fallout concerns for the UK.

A quiet economic calendar might put the spotlight on risk trends, which could potentially see the pair correcting lower on continued positivity if oil prices pick up.

Taking this into consideration, we look to find short term trading opportunities using the Grid Sight Index (GSI) indicator.

USD/CAD Levels to Watch in US Trading Hours, Crude Inventories Ahead

Click Here for the DailyFX Calendar

The official EIA weekly Crude Oil Inventories figure is the main economic indicator of note in an otherwise quiet economic calendar. Economists are expecting a -2000K draw-down coming into today, slightly higher that the prior -2546K figure.

Crude Oil and USD/CAD 20-day correlation is sitting at -0.65 while 10-day correlation is at -0.25 at the time of writing. These figures might imply that correlation has eased lately as the US Dollar might be gaining strength on the backdrop of rising Fed rate hike bets. With that said, safe haven flows were seemingly a major contribution for the US Dollar’s strength as of late, and a “risk on” bias with Crude Oil joining stocks, could see a correction lower for the pair. In this context, the Crude Oil Inventories figures might see a reaction in the USD/CAD as well.

USD/CAD 5-Min GSI Chart: July 20, 2016

USD/CAD Levels to Watch in US Trading Hours, Crude Inventories Ahead

The USD/CAD is trading sideways heading into US trading hours. The GSI indicates near even movements to the upside or the downside of past momentum patterns in the very short term. The indicator calculates the distribution of past event outcomes given certain momentum patterns, and can give you a look at the market in a way that's never been possible before, analyzing millions of historical prices in real time. By matching events in the past, GSI describes how often the price moved in a certain direction.

You can learn more about the GSI here.

USD/CAD Technical Levels:

USD/CAD Levels to Watch in US Trading Hours, Crude Inventories Ahead

Click here for the DailyFX Support & Resistance tool

We use volatility measures as a way to better fit our strategy to market conditions. The USD/CAD is seeing slightly reduced volatility lately (on a 14 day ATR measure), and a lack of significant scheduled event risk might imply that range bound trading plays might be appropriate in the short term, but caution is advised on the Crude Inventories release.

USD/CAD 30-Min Chart: July 20, 2016

USD/CAD Levels to Watch in US Trading Hours, Crude Inventories Ahead

The USD/CAD is pivoting around possible resistance at 1.3050. Further levels of potential resistance on a move higher might be 1.3080, the 1.31 handle, a resistance area below the 1.3150 figure and the 1.32 handle.

Levels of potential support on a move lower may be the 1.30 figure, an area below 1.2920 to 1.29, 1.2867 and 1.2830.

When price reaches those levels, short term traders might use the GSI to view how prices reacted in the past given a certain momentum pattern, and see the distribution of historical outcomes in which the price reversed or continued in the same direction. We generally want to see GSI with the historical patterns significantly shifted in one direction, which could potentially be used with a pre-determined bias as well.

A common way to use GSI is to help you fade tops and bottoms, and trade breakouts. That’s why traders may want to use the GSI indicator when price reaches those specific pre-determined levels, and fit a strategy that can offer a proper way to define risk. We studied over 43 million real trades and found that traders who do that were three times more likely to turn a profit. Read more on the Traits of Successful Traders” research.

Meanwhile, the DailyFX Speculative Sentiment Index (SSI) is showing that about 52.9% of traders are long the USD/CAD at the time of writing, reducing longs on the move up.

You can find more info about the DailyFX SSI indicator here

--- Written by Oded Shimoni, Junior Currency Analyst for DailyFX.com

To contact Oded Shimoni, e-mail oshimoni@dailyfx.com

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

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