Day trade
Trade view / 08 December 2016 at 8:36 GMT

Signals still bearish for USDCAD

Analyst / PIA First
United Kingdom
Instrument: USDCAD
Price target:
Market price:
Market highlights

There were strong equity market gains across the board Wednesday with some capitulation in short positions as perceived negative developments for markets failed to push equities lower. The latest event that failed to trigger downward pressure was the weekend Italian referendum, and Donald Trump’s election victory is still an important factor as well.

The Dax index advanced 1.98% on the day to the strongest level seen in 12 months while the FTSE gained 1.8%. European markets were boosted by hopes that the European Central Bank would extend its bond-buying programme. There was further relief surrounding the Italian outlook with fresh elections likely to be delayed, although uncertainty remains a key factor. 

Wall Street also maintained a notably robust tone with fresh record highs despite a decline in healthcare stocks. US equities gained support from expectations that there would be a pro-growth Administration and a policy of tax cuts with the S&P index gaining 1.3% as records were broken. Better-than-expected Chinese trade data maintained the optimistic tone on Thursday with the Nikkei index advancing close to 1.5% on the day. 

The ECB policy meeting later today will be the next test for equity markets with high volatility inevitable.

EURUSD

The US JOLTS job-opening data was in line with expectations at 5.53 million for October while September’s data was revised up to 5.63m which maintained confidence in the labour market.
US yields edged lower on the day which curbed potential dollar support and the currency remained prone to an underlying correction.

The Italian PM's resignation was again rejected by the president and talks will continue over the next few days. Moody’s downgraded the Italian credit rating outlook to negative from neutral.

EURUSD found support on approach to the 1.0700 area and rallied above 1.0750 with underlying short covering still a feature ahead of the very important ECB policy announcement on today.

USDJPY

USDJPY was unable to make a serious test of the 114.50 level on Wednesday and there was a small decline in US yields which sapped dollar support. The strength in risk appetite was important in limiting potential yen support with moves dominated by dollar moves. The dollar declined to lows near 113.10.

There was no significant negative reaction to the $69.1 billion in Chinese reserves for November, the sharpest decline for 10 months.

China’s trade data was better than expected with exports gaining 5.9% in the year to November while imports rose 13%. The data increased confidence in the outlook for Chinese and global demand which supported overall risk conditions.

Sterling

UK industrial production data was weaker than expected with a 1.3% October decline compared with an expected 0.4% decline. Although there was an impact from lower oil production, manufacturing output was also weak.

GBPUSD dipped below the 1.2600 level before finding support while EUR/GBP hit resistance at 0.8550.

The NIESR data recorded 0.4% growth in the three months to November, unchanged from the previous month. The RICS house-price index rose to a seven-month high of 30 from 23 previously, although buying interest was limited. GBPUSD edged towards 1.2650 on a wider US correction.

Swiss franc

EURCHF was blocked below 1.0850 on Wednesday, although it held a firm tone on solid risk appetite while the dollar hit resistance above 1.0100. 

The latest data on Swiss currency reserves recorded an increase to CHF648bn for November from CHF630bn the previous month which suggested that the National Bank had been intervening consistently to prevent franc appreciation.

AUDUSD, USDCAD

AUDUSD recovered from the GDP shock to trade higher on the day. There was support from stronger commodity prices and a generally weaker US currency. China’s trade data maintained the positive risk trend on Thursday with AUDUSD testing the 0.7500 area. 

As expected, the Bank of Canada left interest rates on hold at 0.50% at the latest council meeting. There was a broadly neutral stance, although with concerns surrounding weak non-oil exports. The inflation risks were still described as balanced and there were no hints over forward guidance. 

USDCAD dipped below 1.3250, primarily due to a generally weaker US currency.

Calendar

Major events for the day ahead:

  • ECB policy decision (1245 GMT)
  • ECB President Draghi press conference (1330 GMT)

Technical

USDCAD 

Monthly – After posting a 12-year high in January 2016, we formed a slightly disjointed bearish Gartley pattern. A low close this month will form bearish Evening Doji Star (three-candle pattern) and should lead to further losses (after a corrective bounce).

USDCAD M
Source: Saxo Bank 

Weekly – Sellers emerged close to the 50% pullback level of 1.3574 (from 1.4688-1.2459). Although price action has been mixed we have continued the move to the downside. Channel support is at 1.3100. We should also note the Ichimoku Cloud base at 1.3198.

USDCAD W
Source: Saxo Bank  

Daily – Bearish Outside Day on November 28 kick-started the move to the downside. Cloud base is located close to the channel base and should be a substantial barrier. 

USDCAD D
Source: Saxo Bank 

Intraday (six hours) – We look to be reversing the Elliott Wave count (last five up, now five down). The 261.8% extension level is seen at 1.3092, just below channel support. This will be our main focus. 

USDCAD 6

Create your own charts with SaxoTraderGO click here to learn more

Source: Saxo Bank

Management and risk description

A move through 1.3200 and stop to be placed at entry.

Parameters

Entry: selling at the market.

Stop: 1.3269.

Target: 1.3110.

Time horizon: this week.

— Edited by Michael McKenna

For more on forex click here.

Non-independent investment research disclaimer applies. Read more
3y
usxau usxau
G'day Ian. How are you doing? Did you have a look at cadchf, looks interesting, especially given I share your view of CAD. A break out of the 2 year consolidation phase could have some thrust! :)
3y
Ian Coleman - First 4 Trading Ian Coleman - First 4 Trading
Good morning Sabrina. I will take a look. Have a great day
3y
Ian Coleman - First 4 Trading Ian Coleman - First 4 Trading
I like it ;-) ... would prefer a dip to 0.7560-40 to get long .... but great call
3y
Andrew Perkins Andrew Perkins
short EURCAD & EURJPY from Monday hopping is not an understatement
3y
Ian Coleman - First 4 Trading Ian Coleman - First 4 Trading
LOL.... good luck
3y
Andrew Perkins Andrew Perkins
just going into a meeting so will not be able to know until later , looks like a big toilet break in the meeting cumming up around 1pm LOL
3y
John Shaw John  Shaw
Very interesting observation on the USDCAD of which I watch hourly there Ian. The CDN economy ( real life, not Ottawa's warped view ) is very sluggish right now and not looking any brighter. Personally, I'm bullish USDCAD. But who knows right?. Welcome to the Casino my friend.
3y
Ian Coleman - First 4 Trading Ian Coleman - First 4 Trading
got stopped at entry USDCAD .
3y
Ian Coleman - First 4 Trading Ian Coleman - First 4 Trading
Andrew... did you manage to hold on ?
3y
Ian Coleman - First 4 Trading Ian Coleman - First 4 Trading
got stopped on a EURGBP short .. now 100 tics lower
3y
Andrew Perkins Andrew Perkins
Option traded do I come out now or stay in EURCAD
3y
Ian Coleman - First 4 Trading Ian Coleman - First 4 Trading
I think Euro is weak against the board
3y
Andrew Perkins Andrew Perkins
Out the toilet and back in the real world LOL do you see a bottom for the EUR
3y
Andrew Perkins Andrew Perkins
1.4025 looks a big level
3y
Ian Coleman - First 4 Trading Ian Coleman - First 4 Trading
EURCAD monthly ... think BIG lol
3y
ValeriyKZ ValeriyKZ
Ian , hi! what you about US30 and S&P500 , resdy to sell or waiting one else top's?
3y
Ian Coleman - First 4 Trading Ian Coleman - First 4 Trading
I have nothing to tell me they are finished as yet
3y
Andrew Perkins Andrew Perkins
Ian can you see the 1.4025 level going ??
3y
usxau usxau
Sorry only got back now, I would suggest watching bond yields, never forget this is the biggest market and moves the yen! Today was not dollar strength but Euro weakness! :)
3y
Andrew Perkins Andrew Perkins
Thanks usxau
3y
Andrew Perkins Andrew Perkins
So the news is the oil agreement is signed and going ahead USDCAD is on the move to the channel base 1.3100 , not sure Ian if to hold to see if it falls lower but on the over hand the Fed meeting if 100% they will go ahead with the increase would this push the pair back up,
3y
Ian Coleman - First 4 Trading Ian Coleman - First 4 Trading
Morning Andrew. I have 1.3092 but no sign of a change of trend as yet
3y
Andrew Perkins Andrew Perkins
Good weekend Sir, might see how the next couple of hrs go then get long for this week maybe

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Tradingfloor.com permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Tradingfloor.com and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Tradingfloor.com is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Tradingfloor.com or as a result of the use of the Tradingfloor.com. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through Tradingfloor.com your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. Tradingfloor.com does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail