News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
EUR/USD
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Bearish
Wall Street
Bearish
Gold
Mixed
GBP/USD
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
USD/JPY
Mixed
More View more
Real Time News
  • $DJIA futures carving out a Falling Wedge pattern just above the 200-MA after falling over 8% from the September 3 post-crisis high. $DJI #DowJonesIs a recovery in the works? Find out how to trade these patterns and more here: https://fxnews.org/?/education/technical-analysis-chart-patterns/falling-wedge.html?CHID=9&QPID=917708&utm_source=Twitter&utm_medium=Moss&utm_campaign=twr https://t.co/7dfYFgkpub
  • Copper prices may continue to push higher despite a worrying surge in Covid-19 cases and the lack of progress in Congressional stimulus negotiations. Get your #copper market update from @DanielGMoss here:https://t.co/N2OW566nID https://t.co/C33TkPT1vN
  • After some divergence, #EmergingMarkets capital outflows are picking up alongside the selloff in the #SP500Markets may now be increasingly opening up to the consequences of a slowdown in the US spilling outward given a lack of new fiscal stimulus there - https://t.co/gKEdg1GeeZ https://t.co/I5dAptPjyQ
  • #SP500 futures hurtling towards the 200-MA after breaching Bear Flag support Above-average volume in tandem with the RSI snapping below 40 hints at extension of the recent moveImplied measured move suggests price could fall as far as the 3000 level. #ES #SPX https://t.co/VdZKgblp3S https://t.co/hXHOIS1oho
  • Wall Street Futures Update:Dow Jones (-0.266%)S&P 500 (-0.317%)Nasdaq 100 (-0.524%)[delayed]-BBG
  • Heads Up:🇯🇵 BoJ Monetary Policy Meeting Minutes due at 23:50 GMT (15min)https://fxnews.org/?/economic-calendar#2020-09-23
  • Silver prices in freefall... https://t.co/g32kz3VLNi
  • #Silver extends losses over 3.1% heading into Thursday's Asia Pacific trading session
  • South Korean Vice Finance Minister Kim Yong-Beom: South Korean stock market volatility may expand. Recent Won gains may be due to Chinese Yuan's rise -BBG
  • What is the outlook for financial markets ahead of the first presidential debate and how are Democratic nominee Joe Biden and President Donald Trump doing in the polls? Find out from @ZabelinDimitri here:https://t.co/QQwAZTxZFg https://t.co/4zDmzLQZ3j
Canadian Dollar Forecast: Turns Coming in CAD/JPY & USD/CAD?

Canadian Dollar Forecast: Turns Coming in CAD/JPY & USD/CAD?

2020-09-16 16:00:00
Christopher Vecchio, CFA, Senior Strategist
Share:

Canadian Dollar Forecast Overview:

  • After five consecutive months of gains, the Canadian Dollar has struggled through the first half of September.
  • USD/CAD rates have broken out of their downtrend, while CAD/JPY rates are honing in on key trendline support.
  • According to the IG Client Sentiment Index, USD/CAD rates have a mixed trading bias.
Traits of Successful Traders
Traits of Successful Traders
Recommended by Christopher Vecchio, CFA
Traits of Successful Traders
Get My Guide

Canadian Dollar Begins to Slip Back

After five consecutive months of gains, the Canadian Dollar has struggled through the first half of September. Both CAD/JPY and USD/CAD rates are moving counter to trends in recent months, with the low yielding safe haven currencies finding traction despite ongoing strength in global equity markets. As energy markets have stabilized in recent weeks, a lack of significant upside in oil prices may, in part, be responsible for why the Canadian Dollar has struggled to build on what had been otherwise significant price action developments.

Bank of Canada on Hold, Still

Canadian economic data has started to stabilize itself, after enduring a brief period where it began to underperform alongside its southern neighbor amid the United States’ summer surge in the coronavirus outbreak. But as the US economy is moving forward and gaining more momentum, the Canadian economy is likely to catch a tailwind as well; after all, 20% of Canadian GDP is tied to economic activities with the US. That said, the Bank of Canada still sees too much uncertainty to make any significant changes in the near-term, as was divulged at their September policy meeting last week.

Bank of Canada Interest Rate Expectations (September 16, 2020) (Table 1)

Canadian Dollar Forecast: Turns Coming in CAD/JPY & USD/CAD?

Bank of Canada interest rate expectations have remained steady for weeks. One month ago, there was a 5% chance of a 25-bps rate hike through December 2020; now, there is a 5% chance of a 25-bps rate hike through December 2020. Likewise, no rate moves are anticipated through July 2021.

USD/CAD Rate Technical Analysis: Daily Chart (September 2019 to September 2020) (Chart 1)

Canadian Dollar Forecast: Turns Coming in CAD/JPY & USD/CAD?

The downtrend from the March and May swing highs no longer is intact, and we thus are following USD/CAD price action around a potential reversal higher. Price action has been flagging since the bullish reversal attempt last week, which can be interpreted two ways: a lack of enthusiasm for a bullish move; or, the market digesting a positioning change as speculative and commercial traders change views.

Bullish momentum has eased over the past few days. USD/CAD rates are right at their daily 5, 8-, 13-, and 21-EMA envelope, which is in neither bearish nor bullish sequential order. Daily MACD is trending higher albeit below its signal line, while Slow Stochastics have stopped advancing just below oversold territory. While the pair has struggled to reverse higher, a move through the September high at 1.3260 would signal continuation.

IG Client Sentiment Index: USD/CAD Rate Forecast (September 16, 2020) (Chart 2)

Canadian Dollar Forecast: Turns Coming in CAD/JPY & USD/CAD?

USD/CAD: Retail trader data shows 69.39% of traders are net-long with the ratio of traders long to short at 2.27 to 1. The number of traders net-long is 1.29% lower than yesterday and 33.10% higher from last week, while the number of traders net-short is 2.43% higher than yesterday and 14.47% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USD/CAD prices may continue to fall.

Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed USD/CAD trading bias.

CAD/JPY Rate Technical Analysis: Daily Chart (September 2019 to September 2020) (Chart 3)

Canadian Dollar Forecast: Turns Coming in CAD/JPY & USD/CAD?

CAD/JPY rates failed to clear to the June high at 81.91, and now the rising trendline from the May and July swing lows is coming into focus. Similar to USD/CAD rates, CAD/JPY has been losing momentum through September after an impressive five month run. Falling below the July high, CAD/JPY rates are gaining momentum to the downside. CAD/JPY rates are below their daily 5-, 8-, 13-, and 21-EMA envelope, which is aligning in bearish sequential order. Daily MACD is falling towards the signal line, while Slow Stochastics have fallen into oversold territory. Failure below the May/July trendline would signal an increased likelihood of a deeper reversal.

Trading Forex News: The Strategy
Trading Forex News: The Strategy
Recommended by Christopher Vecchio, CFA
Trading Forex News: The Strategy
Get My Guide

--- Written by Christopher Vecchio, CFA, Senior Currency Strategist

FxNews provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES