Talking Points:
- USD/CAD Technical Strategy: Upside Remains Favored Despite Bounce Off 50% Retracement
- Oil Premium Brings USD/CAD to 1-Week Lows In Anticipation of OPEC Meeting In Vienna
- Upside Option Premium Backs Off After Strong USD Rally
Quick Fundamental Take:
The Canadian Dollar got a boost Monday morning as Oil Producers within OPEC showed unison heading into the Vienna meeting later this month, which propelled the Oil to the highest levels this month. Most of the short-term positive data like a rate hike by the Federal Reserve is baked into the price as Bloomberg calculates the probability of a hike to 98% for the December FOMC meeting.
Access Our Free Q4 Dollar Outlook As The US Dollar Faces An Unorthodox Presidential Election
The Bank of Canada is not expected to act anytime soon, and we’ll continue to keep an eye on inflation expectations and the sovereign bond market to see how investor’s anticipate the implications of President-Trumps trade plans.
Having a Hard Time Trading USD/CAD? This May Be Why
Late November tends to provide thin trading, but over the past few years, USD/CAD has accelerated higher over December & January. We’ll keep a watch on this trend to continue as the charts favor further upside above 1.3264.
Technical Focus:
D1 USDCAD: Clean Corrective Channel Within Broader Uptrend
Chart Created by Tyler Yell, CMT
The Canadian Dollar has gained on Monday morning off of significant support from last week against the US Dollar. Namely, the 50% Fibonacci Retracement of the January-May range at 1.3575. The weakness displayed in the Candian Dollar has aligned with the trend shift that we’ve been focusing on since the price broke above the Ichimoku Cloud and was followed by the momentum line. We continued to favor upside based on both the charts and fundamental story developing this week. Wednesday, U.S. Data comes in the form of Durable Goods, which are not expected to affect the priced in rate-hike for December one-way or another.
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As the price remains above the Ichimoku Cloud, the path of least resistance remains higher, and we could be paving the way for an aggressive rise as we move from a leading diagonal to an impulsive wave ‘iii’ of ‘C’ in Elliott Wave terms. The leading diagonal view is encouraged by the recent break above the pattern high at 1.3313, and the three-wave move toward a 50% retracement of the diagonal down to 1.3005.
The recent turnaround off of 1.32647 provides a base that we can look to as a foundation for advancing the uptrend. Monday’s low around 1.3387 was fought by bulls in the thin markets in a similar fashion that we saw on the Nov. 17/16 session lows.
As long as the price stays above this level, we would expect upside pressure to grow, and we’ll look to confirm the upside pressure on a break above the bearish channel drawn off the 1.3589 high on November 14. The 1.32647 level is highlighted on the chart, and price staying above this level will cause us to treat last week’s turnaround as a counter-trend move that is anticipated to reverse higher favoring further USD strength.
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The current upside target is the November 14 high near the 50% retracement of the January-May range at 1.3589. If 1.3589 breaks, we’ll be on the watch of the 61.8% retracement of the same range at 1.3838.
A few of the support levels that would need to break to change the tune from Bullish to Neutral is 1.3312, the 38.2% Fibonacci Retracement of the Jan-May range followed by Today’s low of 1.3264 that was mentioned above.
Key Short-Term Levels as of Monday, November 21, 2016
T.Y.
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