Final Place Battle – Loonie or Greenback?

USD/CAD Value Evaluation

• Prospects for each bulls and bears
• Upcoming US and Canadian financial knowledge bulletins riddled all through the week
• Uncertainty inside OPEC+ might favor USD/CAD bulls
• IGCS and COT report suggestive of additional draw back

CAN CAD BULLS HOLD ONTO LONG-TERM GAINS WITH FUNDAMENTAL DRIVERS ON THE HORIZON

USD/CAD has mirrored a lot of what has been evident throughout G10 currencies in opposition to the US Greenback. The weak USD has breached a number of key assist ranges which has introduced into query its viability as a safe-haven foreign money. This can be extra noise than data based mostly on precise knowledge, not less than at this early stage of the bearish USD pattern. Though US stimulus undertakings and poor financial knowledge have spurred a lot of its current decline, the US Greenback remains to be the worldwide reserve foreign money. The Euro would be the ‘discuss of the city,’ however essentially, the Eurozone has a protracted approach to go earlier than it will be thought-about as a substitute.

USD/CAD: WEEKLY CHART

Chart ready by Warren Venketas, IG

The weekly chart above represents the sharp decline in USD in opposition to CAD as expressed by topside resistance (yellow) of decrease highs and decrease lows. The present assist zone (blue) has proven to be a key zone with value respecting the realm whether or not it displays assist or resistance. Bulls have defended the decrease sure of the assist zone with conviction up to now, however will a succeeding check carry the identical end result? The bearish bias is tough to disregard however international financial components might carry a few shift in momentum.

The Relative Power Index (RSI) is under the 50 degree which alludes to the present bearish outlook, however draw back momentum has slowed as substantiated by the flattening of the RSI chart line.

USD/CAD: 4-HOUR CHART

Chart ready by Warren Venketas, IG

The top of July has offered US Greenback power off the 1.3331 assist degree. Value motion continues to show a short-term uptrend highlighted by the diagonal trendline assist (yellow). The 61.8% Fibonacci degree (1.3463) might be a key degree for bulls as they give the impression of being to it for preliminary resistance – Fibonacci taken from January 2002 excessive to November 2007 low. A breakout above this degree might lengthen to the prior July swing excessive 1.3483; and past that, the 1.3500 psychological degree looms massive.

With sentiment knowledge (see under) pointing to additional draw back potential, bears will monitor trendline assist (yellow) as an space of confluence, the place a breach under may even see the current swing low 1.3372 come into play as main assist.

COT REPORT: USD/CAD

Supply: CFTC, DailyFX (Covers as much as July 28th, launched July 31st)

The COT report above reveals general web improve briefly positions for USD/CAD which is indicative of a continuation of current CAD power in opposition to the USD. This report is barely lagged which opens up the opportunity of opposing adjustments in web positions.

The Predictive Energy of the COT Report

The right way to Learn the CFTC Report

DECLINES IN OIL REFLECTIVE IN LOONIE

OPEC+ has been in at loggerheads with the overwhelming majority of its members taking a look at reducing provide, however Russia adamant on rising its personal manufacturing by 400000bpd. Lesser demand for the commodity because of diminished demand in manufacturing has stifled the short-term value appreciation. Additional value declines might negatively have an effect on the Canadian Greenback which has benefitted from the current rise in oil costs coupled with the weak US Greenback. Merchants ought to keep watch over provide and demand components affecting oil which might show a robust correlation with CAD.

Additional your data on oil and the significance it performs in monetary markets with Eight Shocking Crude Oil Information Each Dealer Ought to Know

DAILYFX ECONOMIC CALENDAR

Supply: DailyFX Financial Calendar

The financial calendar is studded with excessive impression occasions related to USD/CAD. These knowledge releases might give merchants hints to the longer-term route of the pair. The US Greenback could also be given extra consideration being the world benchmark foreign money, however Canadian knowledge shouldn’t be ignored. These figures will give merchants insights into the state of components of the general economic system which has vital parallels with foreign money markets.

USD/CAD STRATEGY MOVING FORWARD

With the US Greenback in unchartered territory, will the reserve foreign money have the ability to restore its dominance? Market situations don’t seem favorable to the Canadian Greenback both, with oil consolidating and COVID-19 limiting manufacturing progress. How will Q3 unfold for USD/CAD? Some key factors to think about:

• 61.8% Fibonacci degree – 1.3463
• Technical indicators – RSI crossing above 50 degree
• Upcoming financial knowledge
• COT report and IGCS knowledge
• Oil

IG CLIENT SENTIMENT DATA REVEALS POTENTIAL FOR FURTHER DOWNSIDE

In validation of the COT report (above) IGCS reveals retail merchants are at the moment prominently lengthy on USD/CAD, with 71% of merchants at the moment holding lengthy positions (as of this writing). At DailyFX we sometimes take a contrarian view to crowd sentiment, and the very fact merchants are net-long is suggestive of a sustained bearish bias.

— Written by Warren Venketas for DailyFX.com

Contact and comply with Warren on Twitter: @WVenketas