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    Technical Analysis USDCAD : 2016-03-16

    Awaiting Fed meeting results

    Canadian dollar (loonie) is weakening again which is seen on the chart as the rising trend. Its rate fell on lower global oil prices and expected Fed comments about the interest rates policy. No further interest rates hikes is anticipated so far but the US regulator may reveal its plans on monetary policy for this year. Will the Canadian dollar continue rising (weakening)?

    The Bank of Canada meeting was due on March 9. The Bank left the interest rate unchanged at the current 0.5% set in July 2015. Bank of Canada cut the rates twice last year because of the receding oil prices. The hydrocarbons account for more than 25% of Canada’s export. The state profits from weaker national currency and thanks to various moves by the officials the Canadian dollar fell in January to its 12-year low against the greenback. The government is to release budget data on March 22. The budget deficit is estimated to have expanded significantly which may trigger further weakening of the loonie. On the other hand, the US dollar may strengthen in case of positive comment by the Fed. The current performance of the US economy doesn’t counter the rate hike policy. The unemployment is on floor of 4.9% which is close to the full-employment level. Meanwhile, the inflation has approached the Fed target level of 2%. The important economic data are to be released in Canada on Friday on January retail sales and February inflation. The outlook is positive for the economy by, in theory, may warm up the expectations of further interest rate cuts.

     

    USDCAD

    On the daily chart USDCAD: D1 has been declining for two months but failed to break through the 200-day moving average line and the lower Fibonacci retracement level and started correcting upwards. It has come near the resistance of the downtrend. The Parabolic and MACD indicators have formed the signals to buy. The RSI is tilted upwards but has not yet reached the level of 50? The modest positive divergence is seen. The Bollinger bands have widened which may mean higher volatility, they remain tilted upwards. The bullish momentum may develop in case the Canadian dollar surpasses the last fractal high and the Parabolic signal at 1.345. This level may serve the point of entry. The initial risk-limit may be placed below the Parabolic signal and the last fractal low at 1.31. Having opened the pending order we shall move the stop to the next fractal low following the Parabolic and Bollinger signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level at 1.31 without reaching the order at 1.345, we recommend cancelling the position: the market sustains internal changes which were not taken into account.

     

    Position Buy
    Buy stop above 1.345
    Stop loss below 1.31

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