USD/CAD: All eyes on 1.40 heading into a data-heavy week
City Index February 1, 2016 7:18 PM
<p>Markets are off to a bit of a groggy start to the month of February, with most global equity markets trading lower and the US […]</p>
Markets are off to a bit of a groggy start to the month of February, with most global equity markets trading lower and the US dollar seeing mixed performance its major rivals. Oil, the world’s most important market (at least for the moment), is seeing a drop of its own, with WTI trading off nearly 4% on the day.
For FX traders, the drop in oil is having a predictably negative impact on the Canadian dollar. After surging to nearly 1.4700 less than two weeks ago, USD/CAD fell all the way down to close back at the psychologically-significant previous resistance level at 1.40 level last week. On a technical basis, this would be a logical level for trend-following buyers to emerge and try to take advantage of the recent pullback, especially if oil continues to roll over.
If we do see a bounce early this week, the near-term resistance levels to watch will be the Fibonacci retracements of the recent drop at 1.4230 (38.2%), 1.4400 (61.8%), and 1.4530 (78.6%). That said, the sharp drop in the MACD indicator shows that the momentum has rapidly shifted in favor of the bears, so more conservative traders may want to wait to see if USD/CAD can stabilize around these levels rather than automatically assuming the medium-term uptrend will resume. If 1.40 support is conclusively broken, USD/CAD could fall to the 50-day MA near 1.3900 or even the mid-1.30s in the coming weeks.
Beyond the intermarket correlation with oil, USD/CAD will also be buffetted by a series of top-tier economic reports, culminating in Friday’s dual jobs reports.
Key Economic Data / News that May Impact USD/CAD This Week (all times GMT):
- Today: US ISM Manufacturing PMI (15:00)
- Tuesday: No major economic data releases.
- Wednesday: US ADP Non-Farm Employment Change (13:15), US ISM Non-Manufacturing PMI (15:00 GMT), EIA Crude Oil Inventories (15:30)
- Thursday: US Initial Jobless Claims (13:30), US Factory Orders (15:00)
- Friday: US Non-Farm Payrolls (13:30), Canadian Employment report (13:30), Canadian Ivey PMI (15:00)
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.