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USD CAD Outlook: Positive Oil Prices, Confirms Below Ichimoku


Jan.09.2017

Our positive USD CAD outlook could be on the verge of changing considering the recent developments in three points of the IDDA approach to strategy development. Check out this break down of US dollar versus Canadian dollar from a technical, fundamental and market sentiment points of view.

 

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USD CAD Outlook:  Technical Points

Short-medium term: The USD/CAD pair has confirmed below the 4-hour and daily Ichimoku clouds. It is currently flirting with the 38% Fibonacci zone, supported by the 50% and 61% Fibonacci levels at at 1.3163 and 1.3075 respectively. Further rallies are resisted by the daily Ichimoku cloud and the long-term 50% Fibonacci level at 1.3558.

USD CAD Outlook - Daily Chart Technical Analysis USD CAD Outlook - Daily Chart Technical Analysis

 

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While the 4-hour future cloud is downward and thick, the daily future cloud is thin and upward. This gives us a rather mixed USD CAD outlook in the medium to short-term time frames.

 

Long term: On the monthly chart, the pair continues to be supported by the upward cloud. However in 2017 we have a solid bearish engulfing candlestick formation so far, signaling a bearish USD CAD outlook.

USD CAD Outlook - Monthly Chart Technical Analysis USD CAD Outlook - Monthly Chart Technical Analysis

 

The long-term support is set at the neck-line of the long-term Double-Bottom pattern, at 1.2725, where we entered a long-term bullish position in our premium investing group back in July 2016.

 

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USD CAD Outlook: Fundamentals

 

Canada's side: Canada's economic is looking pretty sharp. First off, we saw a positive surprise in employment with  a 53.7K  gain, spurred by an 81.3K rise in full-time hiring – its sharpest climb since March 2012. Canada’s trade balance also turned out much better than expected, printing a surplus of 526 million CAD versus expectations of a 1.6 billion CAD deficit for November. To top these off, last Friday's Ivey PMI reading jumped from 56.8 to 60.8 in December instead of falling to the consensus at 56.0. Not too shabby for Mr. Loonie.

Oil side: Oil price for 2017 is looking to be relatively healthier comparing to 2016. the OPEC output deal in November last year could be enough to keep crude oil and the positively-correlated Canadian dollar afloat for the next few months. We currently believe the oil price to be in mid $60s, but expect a lot of volatility.  We may need to assess it again once the new US president is in the office for a couple of months.

US side: The December NFP report was mixed, since non-farm payrolls was a significant miss while wage growth beat expectations. Meanwhile, rate hike probabilities for 2017 has improved. Another key factor in US economic outlook could be President-elect Trump's policies, which at this point have been pretty controversial.

USD CAD Outlook:  Market Sentiment

According to the trading positions at one the largest brokers in the US, 60% of traders were long the USD/CAD pair last week. Since we use trading crowd sentiment as a contrarian indicator to price action, and the fact that the majority of traders were long gives a further bearish USD CAD outlook, signaling that the pair may continue lower. We are still awaiting the latest market sentiment update to complete this point of the IDDA. Stay tuned in our investing group.

 

USD CAD Trading Strategy

Putting the technical, fundamental and sentimental points of the IDDA approach together, there are three different scenarios for USD/CAD, published in our investing group.

Here are Invest Diva's calculations for important approximate levels for AUD/JPY to keep an eye on:

 

Support Levels Turning Point Resistance Levels
1.3075 1.3163 1.3369
1.2962 1.3250 1.3558

 

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