By IFCMarkets

Improving Canadian economic data bearish for USDCAD

Second quarter Canadian GDP growth was higher than the economic growth in Q1. Will the USDCAD slide continue?

Economic data released in Canada in recent weeks were positive. Trade deficit in goods narrowed more than expected in June: to C$ 0.63 billion from C$2.72 billion. Unemployment in July also declined more than expected: to 5.8% from 6% in June. Meantime inflation rose to 3% in July when a steady 2.5% inflation was forecast. And second quarter GDP growth was higher than in the first three months of 2018 – 2.9% over the same period a year ago versus 1.3% in Q1. Improving Canadian economic performance is bullish for USDCAD.

On the daily timeframe USDCAD: D1 is trading with negative bias after hitting twelve-month high in the end of June. The price has returned above the 200-day moving average MA(200) after testing it.

• The Parabolic indicator has formed a sell signal.
• The Donchian channel indicates downtrend yet : it tilted lower.
• The MACD indicator is below the signal line with the gap narrowing. This is a bullish signal.
• The stochastic oscillator is rising but has not reached the overbought zone.

We believe a bearish momentum will continue after the price breaches below the lower Donchian boundary at 1.2886. This level can be used as an entry point for placing a pending order to sell. The stop loss can be placed above the upper Donchian channel at 1.3102. After placing the pending order the stop loss is to be moved every day to the next fractal high, following Parabolic signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. If the price meets the stop-loss level (1.3102) without reaching the order (1.2886) we recommend cancelling the order: the market sustains internal changes which were not taken into account.

Technical Analysis Summary

Market Analysis provided by IFCMarkets