Saturday, January 29, 2022

USD/CAD Extends Bearish Price Series Ahead of US Retail Sales Report

canadian dollar talking points

As rising numbers of USD/CAD bounce back from a new monthly low (1.2453) Federal Reserve officials Strike a bullish note, but the exchange rate remains vulnerable to further downside as it extends a series of lower highs and lows since the start of the week.

USD/CAD Extends Bearish Price Series Ahead of US Retail Sales Report

USD/CAD appears to be in the midst of a broad correction as it retests December low (1.2606), and the exchange rate may continue to advance from October low (1.2288), as new data prints out. are. Slowdown in economic activity is expected in the US.

US retail sales report expected to show Household spending is flat in December, while the U.K. Michigan Confidence Survey is Be expected To reflect a downtick in consumer sentiment, and a batch of disappointing data prints could put USD/CAD under pressure as it encourages the Federal Reserve to delay monetary policy normalization.

As a result, USD/CAD may continue to depreciate ahead of the next Federal Open Market Committee (FOMC) interest rate decision on January 26 as it fails to defend the monthly opening range, but A further fall in the exchange rate could fuel the recent volatility in retail sentiment similar to the behavior observed during the previous year.

Image of IG client sentiment for USD/CAD rate

IG Client Sentiment Report shows 75.89% are merchants in present net long USD/CAD, With the ratio of long to short traders standing 3.15 to 1.

The number of net-long traders is 13.09% higher than yesterday and 58.75% higher than last week, while the number of net-short traders is 20.92% lower than yesterday and 16.62% lower than last week. A jump in net-long interest has boosted the slack in retail sentiment as 65.87% of traders were net-long USD/CAD earlier this week, while net-short positions decline as the exchange rate trades. Fresh Monthly Low (1.2453),

Simultaneously, the decline from the December high (1.2964) could be a correction in the broader trend as the FOMC appears on track to implement higher interest rates in 2022, but recent price action gives room for further exchange rate declines. Because it spans a series of low highs and lows from the beginning of the week.

USD/CAD Rate Daily Chart

Image of USD/CAD rate daily chart

Source: trading view

  • Keep in mind, USD/CAD traded at a new 2021 high (1.2964) in December, even though Relative Strength Index (RSI) Divergence with price, but the exchange rate appears to have reversed after a failed attempt to test the December 2020 high (1.3009).
  • USD/CAD has pulled out of December’s low (1.2606) as it failed to defend the monthly opening range with a recent series of lower highs and lows pushing the exchange rate below the 200-day SMA (1.2498) for the first time since November.
  • 1. requires a break/close under.2410 (23.6% expansion) to 1.2440 (23.6% expansion) area to bring 1.2360 (100% detail) area on the radar, with a break below October low (1.2288) Opening the area from 1.2250 (50% expansion) to 1.2260 (38.2% expansion).
  • However, the lack of speed Break/close below 1.2410 (23.6% expansion) to 1.2440 (23.6% expansion) zone Could push USD/CAD back Fibonacci overlap around 1.2620 (50% retracement) to 1.2650 (78.6% extension)MILF with a trick 1.2770 (38.2% expanse.) opening 1.2830 (38.2% retracement) to 1.2880 (61.8% expansion) Area.

— Written by David Song, Currency Strategist

Follow me on Twitter @DavidJSong

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