Bullish Divergence Hints at Rebound for USD/CAD

Canadian Greenback, USD/CAD, Coronavirus Vaccines, Crude Oil Costs, Bullish Divergence – Speaking Factors:

• The Canadian Greenback could hand over gained floor within the close to time period as coronavirus instances proceed to stay elevated.
• Bullish RSI divergence may ignite a rebound in USD/CAD charges.

Asia-Pacific Recap

Fairness markets traded broadly combined throughout Asia-Pacific commerce, with Australia’s ASX 200 and Hong Kong’s Hold Seng Index climbing greater whereas China’s CSI 300 and Japan’s Nikkei 225 misplaced floor. The Australian Greenback spiked greater within the wake of the Reserve Financial institution of Australia’s rate of interest determination, earlier than persevering with its downward slide in the direction of the back-end of the session.

The US Greenback adopted 10-year Treasury yields greater, whereas the New Zealand Greenback and Swiss Franc largely underperformed their main counterparts. Dollar power weighed on gold costs, with the anti-fiat steel sliding 0.4% decrease. Crude oil costs additionally drifted decrease however nonetheless stay constructively positioned above $64 per barrel.

Trying forward, commerce steadiness information out of the US and Canada headline the financial docket alongside manufacturing PMI figures out of the UK.

DailyFX Financial Calendar

Brief-Time period Pullback Forward for CAD

The commodity-sensitive Canadian Greenback has been one of many high performing main currencies in latest weeks, on the again of the Financial institution of Canada tapering its Quantitative Easing program and transferring ahead fee hike expectations.

Resilient crude oil costs, and a ramped up vaccine roll-out have additionally helped elevate the foreign money in opposition to its haven-associated counterparts, with the USD/CAD change fee sliding simply over 3% decrease within the final six weeks. Canada is now vaccinating as many voters a day, on a per-capita foundation, because the UK and US.

Supply – Worldometer

Nevertheless, an infection numbers have but to meaningfully decline, with the 7-day transferring common monitoring instances hovering simply shy of 8,000. This implies that present restrictive measures could stay in place for an prolonged time frame.

These improvement may start to take some shine of the Loonie’s latest run greater, and see its haven-associated counterparts peg again misplaced floor within the coming days. Disappointing employment information for April, scheduled for launch on Might 7, could intensify this downturn.

USD/CAD Every day Chart – Bullish Divergence to Set off Reversal

Chart ready by Daniel Moss, created with Tradingview

From a technical perspective, the USD/CAD change fee could possibly be poised to rebound greater within the close to time period, as worth approaches key assist on the 2018 low (1.2247).

Bullish RSI divergence, in tandem with the plateauing slope of the 8-EMA (1.2338), could encourage would-be consumers.

Remaining constructively positioned above 1.2250 possible paves the best way for worth to retest former support-turned-resistance on the March low (1.2365). Hurdling that brings the February low (1.2468) into the crosshairs.

Nevertheless, if assist offers approach, a continued draw back push to psychological assist at 1.2200 is greater than possible.

The IG Consumer Sentiment Report reveals 83.48% of merchants are net-long with the ratio of merchants lengthy to brief at 5.05 to 1. The variety of merchants net-long is 13.34% greater than yesterday and 40.61% greater from final week, whereas the variety of merchants net-short is 2.62% greater than yesterday and 13.29% decrease from final week.

We sometimes take a contrarian view to crowd sentiment, and the very fact merchants are net-long suggests USD/CAD costs could proceed to fall.

Merchants are additional net-long than yesterday and final week, and the mix of present sentiment and up to date modifications offers us a stronger USD/CAD-bearish contrarian buying and selling bias.

— Written by Daniel Moss, Analyst for DailyFX

Comply with me on Twitter @DanielGMoss