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USDCAD Tests Below Ichimoku – Oil, Fed Rate Hike Battle


Dec.11.2016

USDCAD Tests Below Ichimoku

Another happy Monday for Crude Oil. However, as the "black gold" soars beginning of the trading week, USDCAD tests below Ichimoku. With the Fed interest rate hike highly anticipated in December, this could be the great currency pair battle to watch before we finally say goodbye to 2016.

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Technical Analysis | USDCAD Tests Below Ichimoku

Daily Chart: After hitting the 50% Fibonacci retracement level at 1.3525, the USD/CAD pair has made turn back down, erasing all the progress it made in the past three months. On Monday, USDCAD dared to test below the upward moving  Ichimoku cloud.

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As I covered last week, the Tenkan line has also crossed below the Kijun line. And the pair is currently testing the median support of 1.31. This level is especially important because it has acted both as support and restsitance multiple times since May 2016.

 

USDCAD tests below Ichimoku cloud on daily chart - Technical Analysis USDCAD tests below Ichimoku cloud on daily chart - Technical Analysis

Monthly Chart:  On a longer time-frame, we are now facing a clear bearish engulfing while the pair remains above the monthly Ichimoku cloud. Long-term support is set at 1.2725, which is a 2009 resistance.

 

USDCAD tests below Ichimoku cloud - Bearish Engulfing on Monthly Chart USDCAD tests below Ichimoku cloud - Bearish Engulfing on Monthly Chart

Fundamentals | USDCAD Tests Below Ichimoku

US Side: The US economy has seen some good days and some bad ones in the final quarter of 2016.

The bad:

  • Total personal spending weaken in October, which is a bad sign for the first month of Q4.
  • The trade gap widened in October, thanks to a slump in exports.
  • November doesn’t look too bright for trade because both Markit and ISM are saying in their respective PMI reports that exports are not looking good.
  • There was a slide in the labor force participation rate and the quality of the job gains

The good:

  • Revised estimate for Q3 GDP growth was a welcome surprise.
  • CPI continues to improve
  • Non-farm employment has consistently been above the 100K “floor” that’s needed to keep up with working age population growth.
  • The jobless rate is at the lowest level since August 2007.

Now the obvious question is, will the Fed finally raise interest rates?

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Canada's Side: Actually, let's talk about oil.

Crude oil prices jumped up again at the start of the trading week. This was mainly due to some non-OPEC producers who struck a deal to join their OPEC buddies to cut oil supply over the weekend. Taken together, they said they would lower output by 558k barrels per day. Russia agreed to a 300k b/d reduction and Mexico said it would cut by 100k.

Momentum may be capped if the EIA monthly productivity report due later in the day reveals a strong pickup in US output.  If there are signs of a strong recovery, market pariticpants may start a speculation that the recent gains in oil prices may be offset, while US and some major producers including Canada, Brazil and Norway are not planning to cut supply.

This theory could bring the USD/CAD pair back on track with November gains.

 

 

Market Sentiment | USDCAD Supported by Ichimoku

On Friday 61% of traders were bullish on USD/CAD on one of the largest retail FX brokers in the US. We will sent out an update on Monday's sentiment on our Facebook page once it is available. So far, using this as a contrarian indicator, we are getting more of a bearish signal.

 

Trading Strategy | USDCAD Tests Below Ichimoku

Putting the technical, fundamental and sentimental points of the IDDA approach together, we could consider going for a short to medium-term position in the USD/CAD pair. Please visit out Premium Facebook Group for detailed strategy.

 

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

Support Levels Turning Point Resistance Levels
1.30 1.3250 1.3525
1.31 1.34 1.3750

 

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 xoxo

Kiana 喜愛成
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