Check out my previous USDCAD deep dive's here and here to see how we have progressed...
Price has progressed a lot since we did a deep dive on U/C. We can see price has now clearly broken out of the long-term descending channel as we've had great USD strength over the past couple of weeks. This is due to multiple reasons, such as the Fed's hawkish stance on interest rates and a large amount of coronavirus vaccine administrations.
After the initial breakout, we saw price retrace and rejected the channel's top, confirming it as new support in mid-June. Now, we see price test previous key horizontal levels such as 1.238 and 1.258. USD is the base currency in this pair, so we could expect U/C to continue heading higher and retesting previous key levels with continued USD strength.
We can see that price was clearly ranging between 1.2025 and 1.214 until the breakout, then 1.248 was seen as clear resistance until it was clearly broken, and we're now waiting on a retest before we could potentially go long again.
Most traders are currently short on this pair and expecting price to quickly fall back inside the channel and possibly continue the long-term trend. If over the next couple of weeks, we do get continued USD strength from CPI, PPI and GDP data, as well as the FOMC meeting in a few weeks, it's likely we could continue to see U/C continue breaking these previous levels and head higher.
There's a few high-tier economic events coming out over the next couple of weeks such as CPI, PPI, Retail Sales, GDP and the FOMC press conference for the USD. And for the CAD we've got only The BoC coming out with the monetary policy report and rate statement. We've got loads of room for USD strength to come in, and not be overtaken with CAD strength for a while.
Over the next few months, I expect CAD to soften as the recent acceleration in global growth hits a slower inflexion point, domestic growth meets market expectations, and US real yields rise as a Fed taper approaches. Brent is unlikely to rise above $70bbl in the near term, 2y yield differentials no longer exert downward pressure on USD/CAD, and investors are already positioned for CAD strength.
Yesterday, the Federal Open Market Committee (FOMC), the Federal Reserve’s policy-making body, implemented yet another 75 basis point interest rate hike. While this move was perfectly in line with market forecasts, Chair Powell’s comments following the subsequent press conference, in which he discussed the FOMC’s new set of economic projections, were significant. He continued to […]
Statistics Canada released a surprising new batch of inflation data this morning: month-over-month CPI failed to meet market forecasts, declining by 0.3% instead of the anticipated 0.1%. Rather than being an outlier, the other measurements of CPI mostly followed suit, as both year-over-year Trimmed CPI and Median CPI likewise failed to meet expectations. Trimmed CPI’s […]
At 9:30 pm Eastern Time tonight, the Reserve Bank of Australia (RBA) will be publishing their latest round of monetary policy meeting minutes. While there is a chance that their intentions could come across as more hawkish than expected, they currently have little reason to be. Despite relatively low unemployment at 3.5%, steady GDP growth, […]
DISCLAIMER: All comments made by TraderNick’s Forex Group, LLC are for educational and informational purposes only. All comments should not be construed as investment advice regarding the purchase or sale of any securities or financial instrument of any kind. Please consult with your financial adviser before making an investment decision regarding any securities or financial instruments mentioned by TraderNick’s Forex Group, LLC. TraderNick’s Forex Group, LLC assumes no responsibility for your trading and investment results. All information on any of the platforms utilized by TraderNick’s Forex Group, LLC was obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. TraderNick’s Forex Group, LLC, its employees, representatives, and affiliated individuals may have a position or effect transactions in the securities and financial instruments herein and or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies. Trading of any type involves very high risk and may not be suitable for all investors. TraderNick’s Forex Group, LLC, its subsidiaries and all affiliated individuals assume no responsibility for your trading and investment result. Read our full disclaimer here