USD/CAD Deep Dive: Retracement or Further Downside?
Check out my previous USDCAD deep dive here to see how we have progressed...
Price has progressed quite a bit since the latest USDCAD deep dive in March. Price has in fact continued pushing lower and continued the long-term downtrend. We have also broken through where I expected to see some consolidation (which we did) at 1.228, and we have now formed a new lowest support at 1.2025. This is now a 600-pip move which I have accurately predicted.
Price just rejected the 1.214 level, which lines up as the range's resistance which is just below the H8 bearish OB, an area where traders who went short at 1.214 have their stop losses, and hence price is likely to head towards there to take out their stop losses before reversing and continuing to the downside.
We're seeing a couple of mid-tier news releases coming out today and over the next couple of days, including the second Q1 2021 GDP reading, initial jobless claims, pending home sales, and core durable goods orders. If we see more employment or a higher GDP revision than expected, we may see some fast-paced moves to the downside.
Conversely, if we see the economy become weaker than expected, we could likely see price come back to previous support levels such as 1.228, if not higher at 1.238. Look out for the data first before taking any action in the market.
The downward trend in initial jobless claims continues. The overall trend of jobless claims is no doubt still moving in the right direction, and participants are still getting more and more confident that we could see a fast recovery of the labour market despite the dismal print we saw in the April NFP.
Following the previous FOMC meeting, and especially after the Minutes, more attention is placed on the labour data as the market tries to figure out when the point of “substantial progress” has been reached. However, with close to 8 million jobs still shy of pre-pandemic levels, there is still a very long way to go before it seems the FED will be impressed.
Looking at retail sentiment above, we can see that most traders are long on this pair. Retail traders are likely trying to find support at these nearby levels and push to the upside, likely to the channel's top at around 1.23.
Depending on the outcome of the next couple of news events, I am expecting price to move somewhat like the arrows above. I expect banks and other financial institutions to try and take out retail trader's positions that have gone short at 1.214. Once we see price reach the bearish OB, I will be looking to go short following successive price action confirmations of a rejection to this level.
As this week comes to a close, we are looking ahead at future setups that could be some of the best opportunities for the next several trading sessions. Here are some pairs for next week that we are looking at. EUR/JPY Recent data has shown a slow down in the German manufacturing sector. With European […]
When it comes to testimonies, it's all in how you say it. Jerome Powell has to be very particular in the way he makes his statements and answers the ensuing questions. Here is what might be in store for the market in the coming days and weeks, and whether or not there will be more […]
The historically 'safe' currency to hold in times of recessions is in a unique situation now with a couple factors in place. Here is why the yen is stronger today as well as some trade setups that could push its value either up or down. Weaker Yen Now, Stronger Yen Later The Bank of Japan […]
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