USD/CAD Price Tracks Weekly Vary Forward of Canada Employment Report

Canadian Greenback Speaking Factors

USD/CAD might commerce in an outlined vary forward of the replace to Canada’s Employment report because it reverses forward of the weekly low (1.2761), however the Relative Energy Index (RSI) continues to point a bigger correction within the alternate fee because it nonetheless tracks the upward development established earlier this yr.

USD/CAD Price Tracks Weekly Vary Forward of Canada Employment Report

USD/CAD seems to be caught in a slim vary after testing the 50-Day SMA (1.2790) for the primary time since November, and it stays to be seen if the rebound from the January low (1.2589) will grow to be an exhaustion within the broader development somewhat than a change in market habits as key themes stay in place, and it stays to be seen if the latest shift in retail place will spotlight an analogous dynamic because the crowding habits from 2020 resurfaces.

Wanting forward, Canada’s Employment might preserve USD/CAD afloat because the economic system is anticipated to shed 47.5K jobs in January after dropping 52.7K jobs the month prior, whereas the unemployment fee is projected to elevated to eight.9% from 8.8% in December. Indicators of a protracted restoration might produce headwinds for the Canadian Greenback because it places stress on the Financial institution of Canada (BoC) to additional help the economic system, and the central financial institution might strike a dovish ahead steerage at its subsequent assembly on March 10 as Governor Tiff Macklem and Co. stay“dedicated to offering the suitable diploma of financial coverage stimulus to help the restoration and obtain the inflation goal.”

Till then, key market themes might proceed to sway USD/CAD because the US Greenback broadly displays an inverse relationship with investor confidence, and it appears as if the lean in retail sentiment will even persist as merchants have been net-long the pair since Could 2020.

The IG Shopper Sentiment report exhibits 70.86% of merchants are nonetheless net-long USD/CAD, with the ratio of merchants lengthy to brief standing at 2.43 to 1. The variety of merchants net-long is 16.99% increased than yesterday and 12.58% increased from final week, whereas the variety of merchants net-short is 15.60% decrease than yesterday and 30.17% decrease from final week.

The decline in net-short place might be a perform of profit-taking habits as USD/CADreverses forward of the weekly low (1.2761), whereas the rise in net-long curiosity has fueled the crowding habits carried over from final yr as 52.12% of merchants have been net-long the pair final week.

With that mentioned, it stays to be seen if the rebound from the January low (1.2589) will grow to be an exhaustion within the broader development somewhat than a change in USD/CAD habits as key market themes stay in place, however the Relative Energy Index (RSI) continues to point a bigger correction within the alternate fee because it nonetheless tracks the upward development established earlier this yr.

USD/CAD Price Each day Chart

Supply: Buying and selling View

• Have in mind, USD/CAD cleared the January 2020 low (1.2957) following the US election, with the alternate fee buying and selling to recent yearly lows in November and December because the Relative Energy Index (RSI) established a downward development throughout the identical interval.
• USD/CAD began off 2021 by taking out final yr’s low (1.2688) regardless that the RSI broke out of the bearish formation, with lack of momentum to carry above the 1.2770 (38.2% growth) area pushing the alternate fee briefly under the Fibonacci overlap round 1.2620 (50% retracement) to 1.2650 (78.6% growth).
• Nevertheless, USD/CAD broke out of the opening vary for January following the string of failed try to shut under the 1.2620 (50% retracement) to 1.2650 (78.6% growth) area, with the RSI diverging with value because it established an upward development.
• USD/CAD seems to be caught in a slim vary because it assessments the 50-Day SMA (1.2790) for the primary time since November, however lack of momentum to push under the 1.2770 (38.2% growth) area might ship the alternate fee in the direction of the 1.2880 (61.8% growth) space.
• Want a break/shut above 1.2880 (61.8% growth) to convey the 1.2980 (61.8% retracement) space on the radar, with the subsequent area of curiosity coming in round 1.3030 (50% growth) to 1.3040 (50% growth) adopted by the 1.3200 (38.2% growth) deal with.

— Written by David Track, Forex Strategist

Comply with me on Twitter at @DavidJSong