April 27, 2023

Is The Dollar About to Pop?

Frank Cabibi

As we near the end of our trading week, investors wait some heavily anticipated news for the Canadian dollar as well as the USD. Meanwhile, a beaten down USD looks to make higher moves after the recent GDP report. Here are some other important events coming out later today and Friday:

EdgeFinder Analysis

Now, USDCAD is a +6 strong buy rating on the EdgeFinder. The pair is coming out of one of its worst months of the year on a ten year average. May is historically not a positive month either, but price has been able to pair losses from this month, up 1.40% in April. The crowd is largely short this pair, who are trying to trade against the trend. However, price continues to push higher.

UC is near its mid term target of 1.36459 and appears to want to complete its move to the falling trend line. Although USD showed recent weakness, Canada’s loonie is under tremendous pressure as we near lower-than-expected GDP news this Friday. The trend projection shows a steady growth for the next seven days, and COT remains bullish in USD’s favor.

Potential long play on EURCAD as price takes a decent pullback on the 4H timeframe. The pair is currently testing support and is starting to show some rejection. However, should price break lower, more support can be found around 1.49478 that served as support before. The uptrend still looks healthy after the recent upside. A break under that previous bottom level of support might indicate a reversal, however.

The pair has been a neutral rating for some time and used to be sell leaning before the trend reading of +2. Retail is heavily short this pair although smart money is heavily bullish EUR and short CAD. April is historically a bearish month for the pair on both the 5 and 10 year averages, but it seems to be defying the past as price gained nearly 2% this month.

AUDUSD remains a strong sell on the EdgeFinder as price rebounds 0.13% on the day. Although the dollar looks weaker, it is not as weak as the AUD buck. In terms of fundamentals, the USD has the overall advantage with unemployment as the only exception.

Retail is heavily bullish on this pair, but price hasn't made any considerable moves to the upside yet. The EdgeFinder has not given this pair a 0 rating since the start of this year which suggests a heavy bearish sentiment towards the buck.

Retail Spotlight

Retail sentiment looks to be heavily bearish on the euro while strong bullish the AU dollar. These two currencies are something to look out for tomorrow and for next week. CPI is set to come out tomorrow for the EUR while CAD will report GDP. The crowd could be betting on a higher GDP than expected for the Canadian dollar and possibly higher inflation numbers for EUR.

Smart Money Spotlight

Our smart money tracker reveals some interesting changes in institutional positions from last week. Commodities remain the most bought assets while JPY, CAD and SPX are the top shorted. SPX looks especially bearish as sentiment grows to a stronger by the bears. COT may be starting to flip sentiment on gold after last week's activity. Platinum entered the top 3 on the tracker with growing bullishness. CHF may be flipping too.

Fundamental Spotlight

USD advanced GDP came out this morning lower than expected. In comparison to the other currency's reports, the US is showing the most growth, however, 1.1% was a considerable contraction from last quarter's report. In either case of expanding or contracting economy, it may be bullish for USD as the Fed stated no plans of rate cuts going into May or for the remainder of 2023.

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