Earlier this morning, CAD pairs moved hard on GDP news; CAD/JPY is up over 60 pips already today while USD/CAD tumbled when actual GDP growth/decline beat expectations by 1%. Here are our thoughts on these trending pairs this week:
Here is CJ on the 1D chart. The pair respected resistance back in early June and formed a new resistance after the four-day sell off. Notice how on the 14-Day RSI, prices were above 70 before it plummeted from 81 to 79 in a matter of days. Now RSI is getting higher as the pair pushes up today. If we see heavy movements like this continue, it is likely that RSI will get close to overbought levels again and can signal short interest for traders. One key level we're looking at is at 79.867. That level has been used as support back in October 2019 and even March of 2020. As prices near that newly formed resistance level, we think it's a good level to watch for short sentiment.
Cad Yen on the 4H chart broke out of a falling trend line which could be a good sign for bulls in the short term if prices close above the trend line. Upside looks like CJ has about 70 pips until it hits that key resistance mentioned on the 1D analysis. Similar to the 1D, the 4H chart holds resistance around the same level (79.800s).
Now looking at USD/CAD on the hourly. The better-than-expected news hurt this pair today as it pinned itself on support. The long wick from last hour makes it look like buyers entered to market as we start this new hour at 12:00 pm EST. It looks like this level of mild support could actually be a good long position. 14-Day RSI is around 47, so in between overbought and oversold. The pair could move in either direction, but our sentiment is more bullish than bearish as of now.
As you can tell, we're a little bearish on the Canadian dollar as the economy continues to suffer from negative economic growth for the past few months. Although actual was better than expected, GDP growth is significantly worse than last month. It went from -7.5% GDP growth to -11.6% decline in GDP. In my opinion, that's not good news, and I'm thinking that this move is not going to last.
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