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
Bullish
GBP/USD
Mixed
USD/JPY
Mixed
Gold
Mixed
Oil - US Crude
Mixed
Bitcoin
Mixed
More View more
Real Time News
  • $GBP: Yesterday’s YouGov MRP poll highlighted that the projected Conservative majority had narrowed from 359 to 339. Get your market update from @JMcQueenFX here: https://t.co/OsniVa6nk7 https://t.co/qaINQQwEMD
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 98.02%, while traders in US 500 are at opposite extremes with 76.01%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/F2ZGnDGNHP
  • Brazil cuts lending rates to all-time low at 4.50 percent as expected. BCB sees a gradual economic recovery, says global outlook is relatively favorable for emerging markets - BBG #brazil #BCB #Ibovespa
  • Brazil benchmark rate lending rate cut 50 bps to 4.50% $USDBRL
  • LIVE IN 30 MIN - Join @JohnKicklighter at for live coverage of the #FOMC rate decision and its impact on #Dollar as well as the broader financial #markets - https://t.co/nxPWwCiRf3
  • US Equity Update (Wednesday Close): $DJI +0.10% $SPX +0.28% $NDX +0.63% $RTY +0.10% $VIX -3.06%
  • Indices Update: As of 21:00, these are your best and worst performers based on the London trading schedule: Wall Street: -0.02% US 500: -0.03% Germany 30: -0.13% France 40: -0.18% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/JLnVU94v5n
  • Inflation? What? Where? Just about everywhere but the headline CPI figure and in places that actually hit American pockets. https://t.co/5I61Le3UNV
  • ...interest/concern specifically in the Repo Market (according to Google search is the highest since they have records back to 2004 https://t.co/J2sTOVZOQX
  • RT @lisaabramowicz1: The Fed isn't worried about repo disruptions heading into yearend. Repo operations have “gone well so far," and “pres…
USD/CAD Technical Analysis: CAD Bulls Face Critical 100-DMA (Levels)

USD/CAD Technical Analysis: CAD Bulls Face Critical 100-DMA (Levels)

2016-02-10 18:30:00
Tyler Yell, CMT, Currency Strategist
Share:

Interested In our Analyst’s Longer-Term Oil Outlook, be sure to sign up for our free oil guide here.

Talking Points:

Why USD/CAD Direction Is Uncertain?

The Canadian Dollar has been a volatile currency across the board. Now, USD/CAD implied volatility over 1-month has reached the highest levels since November 2011. This expected volatility means uncertainty is high even with Oil breaking below the January 20 lows.

Now the focus turns to what is driving the Canadian Dollar across the board as well as against the US Dollar. The US Dollar has been hard hit, and the ~ 1,000-pip fall in USD/CAD could turn the attention of the Bank of Canada back toward potential easing policy. Such a move would likely be due to a stronger relative Canadian Dollar, which hurts exports; alongside weak Oil that continues to put pressure on the energy portion of the economy will likely pressure economic growth.

USD/CAD Technical Analysis: CAD Bulls Face Critical 100-DMA (Levels)

Now that USD/CAD has recently taken out the 2016 opening range lows, there is a view that more downside could be on the way. However, you can see on the chart above that we have entered a key range of support going back to May. Until support, which aligns nicely with the 100-dma has broken, it is hard to see selling USD/CAD as a high probability trade.

To see how FXCM traders are positioned after such a big move, click here.

Key Levels after the Plunge

Considering that, USD/CAD sits in the middle of a wide long-term range between 1.3600-1.4325, the next zone of resistance of 1.4101 remains in focus. An inability to take out that opening range high of February would turn attention back to the bottom of the range with the February 5 low at 1.3710 and the Feb 4 low at 1.3638 of keen interest.

If USD/CAD is not supported by the 100-DMA at 1.3568, a broader view of US Dollar downside would be favored. However, returning to the first level of focus higher at 1.4101, if that level is taken out the next levels of resistance is the 21-DMA at 1.4139 followed by the late January corrective high of 1.4324.

Canadian Dollar Rally is set to Last per Sentiment

When looking at sentiment, crowd sentiment has moved back to a bearish bias relative to recent positioning. We use our Speculative Sentiment Index as a contrarian indicator to price action, and the fact that the majority of traders are selling again provides a contrarian signal that the USDCAD may continue higher. A push further into negative ratio territory on client positioning would favor further upside towards resistance mentioned above.

Combining the technical picture above, with the sentiment picture, a hold of support would further support the bullish argument. However, a break below support of the long-term channel and 100-DMA alongside a flip in retail sentiment from net short against the trend to net long against a potential new trend would further warn of more CAD gains ahead.

USD/CAD Speculative Sentiment Index as of 2/10/2016

USD/CAD Technical Analysis: CAD Bulls Face Critical 100-DMA (Levels)

Interested In Learning the Traits of FXCM’s Successful Traders? If So, Click Here

T.Y.

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

DISCLOSURES

News & Analysis at your fingertips.