USD/CAD ANLAYSIS & TALKING POINTS
- Central bank divergence favoring loonie.
- FOMC in focus.
- Death cross effects just beginning or more to come?
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CANADIAN DOLLAR FUNDAMENTAL BACKDROP
The Canadian dollar has been benefiting from the divergence between the Bank of Canada (BoC) and Federal Reserve’s outlook on monetary policy – the BoC ‘hawkishly’ surprising last week while the Fed is likely to pause or ‘skip’ later this evening. Slightly higher crude oil prices have supplemented CAD strength against the USD today and should the Fed’s guidance be less aggressive than anticipated, the loonie may well rally further.
USD/CAD ECONOMIC CALENDAR (GMT +02:00)
Source: DailyFX Economic Calendar
TECHNICAL ANALYSIS
USD/CAD DAILY CHART
Chart prepared by Warren Venketas, IG
Daily USD/CAD price action is trading at a key area of confluence, around the long-term trendline support (black) and the 1.3300 psychological level respectively. While the trendline support was breached yesterday, bears failed to close below the 1.3300 handle which could be the catalyst that fuels a push lower. The recent downside move has been subsequent to the death cross (red) formation and although the pair is nearing oversold territory as measured by the Relative Strength Index (RSI), there is still room for further downside to come.
From a bullish perspective, a hawkish Fed announcement could invalidate the downside forecast and keep prices above trendline support exposing the 1.3407 swing low.
Key resistance levels:
- 1.3407
- Trendline support (black)
Key support levels:
- 1.3300
- 1.3263
- 1.3226
- 1.3200
IG CLIENT SENTIMENT DATA: MIXED
IGCS shows retail traders are currently LONG on USD/CAD , with 71% of traders currently holding long positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment but due to recent changes in long and short positioning we arrive at a short-term cautious disposition.
Contact and followWarrenon Twitter:@WVenketas
