Technical Forecast for the Canadian Greenback: Impartial
- In what was one of many lowest quantity weeks of the 12 months for world monetary markets, the Canadian Dollar produced a combined however largely optimistic mixture of outcomes.
- Now that positioning within the futures market has been considerably decreased from its yearly highs, nevertheless, there’s extra room for important worth swings; a catalyst is required, nevertheless.
- The IG Client Sentiment Index suggests that the Canadian Greenback has a bearish bias within the near-term.
Canadian Greenback Charges Week in Evaluate
In what was one of many lowest quantity weeks of the 12 months for world monetary markets, the Canadian Greenback produced a combined however largely optimistic mixture of outcomes. 5 CAD-crosses produced Loonie energy (USD/CAD, EUR/CAD, GBP/CAD, AUD/CAD, and CAD/CHF) whereas two noticed weak spot (CAD/JPY and NZD/CAD). Not one of the CAD-crosses moved in extra of +/-0.5%, an indication of how constrained worth motion has been. Now that positioning within the futures market has been considerably decreased from its yearly highs, nevertheless, there is extra room for important worth swings; a catalyst is required, nevertheless.
USD/CAD RATE TECHNICAL ANALYSIS: DAILY CHART (August 2020 to August 2021) (CHART 1)
After fading from the descending trendline from the January 2016 excessive and September 2020 low, USD/CAD charges have been shifting sideways with seemingly no semblance of momentum. It’s too early to say that the downtrend will resume, because the pair has but to return to the descending channel in place since final September.
Momentum is, as instructed, impartial. USD/CAD charges are intertwined amongst their every day 5-, 8-, 13-, and 21-EMA envelope, which is neither bearish nor bullish sequential order. Day by day MACD’s decline above its sign line continues, whereas every day Gradual Stochastics is flat proper above its median line. One other run as much as the yearly highs close to 1.2800 can’t be dismissed within the short-term (notably if crude oil prices slide additional, which appears doable near-term as properly).
IG Shopper Sentiment Index: USD/CAD RATE Forecast (August 13, 2021) (Chart 2)
USD/CAD: Retail dealer knowledge exhibits 62.38% of merchants are net-long with the ratio of merchants lengthy to brief at 1.66 to 1. The variety of merchants net-long is 4.36% decrease than yesterday and 9.45% increased from final week, whereas the variety of merchants net-short is 1.00% increased than yesterday and 20.91% increased from final week.
We usually take a contrarian view to crowd sentiment, and the actual fact merchants are net-long suggests USD/CAD costs could proceed to fall.
But merchants are much less net-long than yesterday and in contrast with final week. Latest modifications in sentiment warn that the present USD/CAD worth development could quickly reverse increased regardless of the actual fact merchants stay net-long.
CAD/JPY RATE TECHNICAL ANALYSIS: DAILY CHART (August 2020 to August 2021) (CHART 3)
Two weeks in the past it was famous that “failing to breach the April swing low is a crucial improvement, concurrent with a rebound above the 50% Fibonacci retracement of the late-January low/Might excessive vary at 86.09. It’s too quickly to say that the flip has arrived given the connection amongst CAD/JPY charges and its slew of indicators, however we’ve got early proof that ‘the low’ could have been discovered.”
CAD/JPY charges have been buying and selling sideways ever since then, and it’s doable that the pair is funneling right into a symmetrical triangle. However, persisting beneath the descending trendline from the October 2007 (all-time excessive) and December 2014 highs suggests merchants ought to hold an open mindset for extra draw back – a minimum of for now.
EUR/CAD RATE TECHNICAL ANALYSIS: DAILY CHART (August 2020 to August 2021) (CHART 4)
EUR/CAD charges are buying and selling in a well-known space, having rebounded at ascending trendline assist from the August 2012 and February 2020 lows in addition to the 76.4% Fibonacci retracement of the 2020 excessive/low vary at 1.4674. The pair has continues to consolidate into a multidecade symmetrical triangle courting again to the December 2008 and March 2020 highs, which in actuality could be drawn even additional again to the implied EUR/CAD fee on the March 1995 excessive. We have to see both a drop beneath 1.4600 or positive aspects by means of 1.4926 (61.8% Fibonacci retracement of 2020 excessive/low vary) earlier than the subsequent directional bias could be ascertained.
CFTC COT Canadian Greenback Futures Positioning (August 2020 to August 2021) (Chart 5)
Lastly, a take a look at positioning within the futures market. According to the CFTC’s COT for the week ended August 10, speculators barely elevated their net-long Canadian Greenback positioning to 7,362 contracts, up from the 4,799 net-lengthy contracts held within the week prior. The futures market is holding close to its lightest net-long positioning since mid-April 2021.
— Written by Christopher Vecchio, CFA, Senior Forex Strategist