Technical Sentiment: Bearish
Key Takeaways
Traders turned bearish on USD/CAD late last week. On Monday the markets are expected to remain relatively quiet. Most traders are staying on the sidelines waiting for the US CPI and Core CPI due on Tuesday, followed by FOMC Meeting Minutes on Wednesday. Until then price action will revolve around two key levels.
Technical Analysis
From a technical perspective, USD/CAD has already taken the first step showcasing the escalading pressure for a USD correction against a slightly bullish CAD bias. Price action has progressed as anticipated following last week’s range break. Traders immediately took notice of 1.0860, a support cluster formed between the 100-Day and 200-Day Simple Moving Averages, dipping down to this area and bouncing off of it quickly afterwards. An important observation regarding this bounce concerns the Daily bar Close on Friday 15th August. Price closed below the previous range support, consolidating the bearish view.
A break below the 100-Day & 200-Day support cluster will open the door for another USD/CAD sell-off. Stochastic continues to decline on an increasingly steeper slope, indicating further weakness for the pair in the coming days. Below 1.0860 traders will initially target 1.0820 in what will likely be a quick selling burst. If US data will largely disappoint this week we might see the sell-off escalate down to 1.0715, albeit this scenario is highly unlikely.
Free Reports:
On a Daily close above 1.0903, inside the previous range, traders should be quick to reduce their short positions or preferably close them altogether; since USD/CAD will attempt to slowly regain the bullish bias and target the tops at 1.0984.
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Prepared by Alex Z., Chief Currency Strategist at Capital Trust Markets
