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USDCAD Confirms Above Pivot On Strong Dollar


Oct.23.2016

USDCAD Confirms Above Pivot

First thing during the first trading session of the first trading day of the week, USDCAD confirms above pivot level we have been eyeing since September. What does this mean for Invest Divas who are looking for long/ medium/ short-term trading opportunities?  Let's take an IDDA approach to find out.

 

USDCAD Confirms Above Pivot - Kiana Danial Reports USDCAD Confirms Above Pivot - Kiana Danial Reports

 

Technical Analysis - USDCAD Confirms Above Pivot

Medium Time Frame

After confirming above the Ichimoku cloud in September, the USD/CAD pair ranged for over a month between the cloud and our pivot of 1.3250. This pivot is especially important because it also falls on the 38% Fibonacci retracement as well as a previous resistance.

So as you may have guessed, this confirmation is a BIG deal for USD/CAD.

USDCAD Confirms Above Pivot - Daily Chart Technical Analysis USDCAD Confirms Above Pivot - Daily Chart Technical Analysis

Long Time Frame

On the monthly chart the USD/CAD pair has developed a massived Double-Top pattern over 14 years and has yet to have complete it. While it pulled back to the neckline at 1.27 in April, it still remains above the Ichimoku cloud and has a long-term shot in completing the chart pattern. Long term resistance levels are set at 1.37 and 1.40

USDCAD Confirms Above Pivot - Monthly Chart Technical Analysis USDCAD Confirms Above Pivot - Monthly Chart Technical Analysis

Fundamentals - USDCAD Confirms Above Pivot

 

While we have clear bullish signals on the technical point of the IDDA approach, the fundamentals are a bit more complicated.

US Side

With the Presidential elections less than three weeks away, we could expect a ton of volatility depending on the outcome.

A Trump victory could have similar impact on the US dollar as Brexit has had on the British Pound.

A Hillary victory could fire up riots in the US, leading to uncertainty, which again could have a negative impact on both the US dollar and the stock market.

 

On the other hand, we have the Fed who has been signaling a rate hike this year. Will the FOMC hike interest rates in November, December or Q1 of 2017? Either way,  at this point it’s just a matter of timing. In the minutes of their September meeting, FOMC members noted that the decision to hold interest rates was a “close call” and that growth is still expected to pick up during this second half of the year. In fact, three hawkish policymakers voted to hike right then and there, but the rest of the committee thought it would be wise to take a cautious approach for the time being.

Canada Side

Governor Poloz downgraded growth and inflation forecasts for the year in October which had a negative effect on the Loonie. Poloz explained that their downbeat outlook was mostly spurred by expectations of weaker export activity in the coming months.

Economic Calendar...

During the London session, the French and German Flash Manufacturing PMI are scheduled to be out at 7 and 7:30 AM GMT respectively. Markit Eurozone Manufacturing PMI is scheduled to be out at 8 AM.

During the New York session, the US is bound to release their set of Markit Manufacturing PMI at 1:45 PM GMT, right after FOMC Member Dudley Speaks at 1 PM.

This could create furhter volatility in the USDCAD. A hawkish tone from Dudley and better than expected PMI results could even push the USD/CAD to our bullish target.

Market Sentiment - USDCAD Confirms Above Pivot

Only 32% of market participants are long USD/CAD.  The fact that the majority of traders are short gives a contrarian signal that the USDCAD may continue higher.

Trading Strategy - USDCAD Confirms Above Pivot

Invest Diva students should already be able to add up the IDDA and create their own trading strategy based on their  risk tolerance. Here are some tips.

Bullish Scenario

Aggressive to moderately aggressive traders can enter a position now, targeting 1.34 or 1.35 in extension.

Stop-loss can be set at 1.30

Bearish Scenario

A break back below the Ichimoku cloud on the daily chart would change our outlook back to bearish, with 1.2850 as first alternative target

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

Support Levels Turning Point Resistance Levels
1.2850 1.30 1.34
1.27 1.3250 1.35

 

 xoxo

Kiana 喜愛成
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Article is commentary only. Trade at your own risk and analysis. Please read full disclaimer 

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