I predicted exactly the retracement of USDCAD in this topic:
The USDCAD confronted the profit taking action last week; the problem is this process keeps going or it is time to BUY again?.
To a FX pair, there is a lot of elements governing the its move. In this pair: USDCAD , besides US and Canada economic data, it is also impacted by GOLD price and Oil price. Canadian is considered as commodity currency because Canada is 5th largest producer of gold and 6th largest producer of oil . We cannot ignore the impact of gold and oil on this pair, the problem is WHEN.
Recent weeks, U/C is governed by weak economic data of Canada and decisions of FED. Currently, those problems are diminished and now U/C needs to find different dynamics to move.
I recap some main factors affecting U/C this week:
+ Unwinding stimulus of FED, USD is stronger against other currencies – USDCAD rises up.
+ Canada economic data is not strong enough to drag USDCAD fall down.
+ US economy is on the recovery road, and Canada is the main goods producers of US, if US economy is positive, so USDCAD is benefited.
- Negative trend views:
+ Gold and Oil price are going up. Normally, if Gold and Oil rise up, USDCAD falls down : CAD is bought. Gold is rising because of correction after long time sell off and gold demand of India and China. Oil is rising because of falling in Oil and gas reserve of US.
+ No major economic data from both US and Canada, profit taking actions could keep maintaining dynamic.
+ US NFP report is negative than expect; this could trigger sell off in USDCAD .
You can see there are a lot of reasons explaining for each step of each forex pair in abundant of economic articles such as Marketwatch, Bloomberg. The problem is picking up what is the truth. This is the most difficult matter when you trade anything from stock, bond, forex to commodity. Choosing what is true in a lot of information is not simple, and in this scenario, it’s not easy to determine what will drive USDCAD .
Normally, if there is no major economic data, is used to trade. I will talk about TA later. This section I just discuss about FA.
I ignore FED taper: the real impact on U/C occurs when the falls down to 45bn. I ignore Gold price, and Oil price too : oil would impact on U/C when it is above $100. After Monday, if there is no action from investors in NYSE, I ignore NFP report impact too.
But there is one piece of data plays key role : US retail sales on Thursday.
If Retail Sales is negative, combine with profit taking and positive data from last week : falling unemployment rate of Canada as well as increasing net change in employment. USDCAD absolutely falls down.
If Retail Sales in positive, combine with positive speeches of FED President Janet Yellen, USDCAD rises up.
- Technical Analysis:
Last week, the price touched 23.6% Fib retracement level and bounced back to the weak : 1.030
indicator: SELL signal appears.
Two strong level at 1.09 and 1.12. This is psychological levels.
The red line: Resistance now becomes support , but this is weak support, it could be broken easily.
The blue trend line: This is strong support, but it is now far from the price. It would take a long time to test.
38.2% Fib retracement level: 1.0820 is a suitable destination for profit taking and correction.
I will SHORT USDCAD to 23.6% Fib retracement :1..0970. 60 pips from current price. The position will be closed before Thursday, I wait Retail Sales is released. If Retail Sales is negative , SHORT U/C to 1.090, if Retail Sales is positive, LONG U/C to 1.1150
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