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USD/CAD in Focus Ahead of Canada CPI data as Oil Prices Rise

USD/CAD in Focus Ahead of Canada CPI data as Oil Prices Rise

2016-09-23 09:58:00
Oded Shimoni, Junior Currency Analyst
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Talking Points:

- USD/CAD finding support around 1.30 following four days of consecutive declines

- Canada CPI figures headline the economic calendar today

- “Fed-speak” and Baker Hughes also on the docket for potential influences

The USD/CAD found some support around the big 1.30 figure following four days of consecutive declines, as the Fed opted to keep monetary policy unchanged and Crude Oil prices gained in recent days.

Looking ahead, Canada CPI data headlines the economic docket but “Fed-speak” and Baker Hughes are also in focus.

Against this backdrop we will form our outlook and look to find short term trading opportunities using different tools such as the Grid Sight Index (GSI) indicator.

USD/CAD in Focus Ahead of Canada CPI data as Oil Prices Rise

Click Here for the DailyFX Calendar

Canada August CPI readings are set to hit the wires 12:30 GMT. Headline CPI is expected to pick up for a 1.4% year-on-year number, while Core CPI is anticipated to downtick for an annualized 2.0%.

In their last policy press release, the BOC said “risks to the profile for inflation have tilted somewhat to the downside since July”, which seemed to have nudged to market to a slightly more dovish perception of the central bank’s outlook.

This might imply that the market could be more sensitive to an upside surprise, a scenario which seems likely to boost the Canadian Dollar.

“Fed-speak” is also in focus today, with scheduled remarks by Harker, Mester and Lockhart. If comments by the speakers push forward Fed rate hike bets, and emphasize a move higher this year, the US Dollar may rise after moving lower following the FOMC rate decision.

The Baker Hughes rig count is also on tap. Signs of increasing demand on more drilling activity could go in line with the recent move higher in Crude Oil prices, which seems to have been caused by speculation of a potential OPEC output freeze.

USD/CAD and Crude Oil 10-day correlation currently sits at -0.86, implying that USD/CAD traders might want to be aware of Crude Oil developments and important tech levels.

USD/CAD Technical Levels:

USD/CAD in Focus Ahead of Canada CPI data as Oil Prices Rise

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 a decline in implied volatility measures, and 20-day ATR readings suggest reduced volatility as well.

In turn, this may imply that the longer term range bound conditions might still be more likely.

USD/CAD 30-Min Chart: September 23, 2016

USD/CAD in Focus Ahead of Canada CPI data as Oil Prices Rise

(Click to Enlarge)

The USD/CAD is reacting nicely from resistance around 1.3080.

Other resistance levels to watch in the short term might be 1.31, the area below 1.3150 and 1.32.

Levels of support may be found at 1.3030, the big 1.30 figure, 1.2980, 1.2950 and 1.29.

USD/CAD in Focus Ahead of Canada CPI data as Oil Prices Rise

In the short term, GSI is showing similar past momentum patterns indeed continued to the downside more often than not.

The GSI indicator above calculates the distribution of past event outcomes given certain momentum patterns. 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.

We generally want to see GSI with the historical patterns significantly shifted in one direction, which alongside a pre-determined bias and other technical tools could provide a solid trading idea that offer a proper way to define risk.

We studied over 43 million real trades and found that traders who successfully define risk 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 43.3% of traders are long the USD/CAD at the time of writing.

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

Follow him on Twitter at @OdedShimoni

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

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