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USD CAD - FUNDAMENTAL DRIVERSUSD FUNDAMENTAL BIAS: BULLISH 1. Monetary Policy In March the Fed delivered on a 25bsp hike as expected with Fed’s Bullard the only dissenter voting for a 50bsp hike. The Dot Plot saw a big upgrade from 3 hikes (Dec) to 7 hikes for 2022, with the FFR seen reaching 2.75%- 3.0% in 2023 before falling in 2024. They did however lower their neutral rate from 2.5% to 2.4% which were a negative. Inflation forecasts for 2022 were raised to 4.1% (previous 2.7%) but med-term inflation saw less aggressive upgrades. Even though the overall message and projections were hawkish, the fact that GDP estimates were lowered to 2.8% from 4.0% shows the Fed expects their actions to impact demand and also reflect some of the recent geopolitical uncertainties. The Fed didn’t share new details on QT but noted that the decision to start selling assets will be made at a coming meeting (markets consensus sees a July start as likely) and added that good progress in QT discussions means a May announcement is likely. During the presser the Chair expressed his view that the economy is doing really well and, should be more than able to withstand the incoming rate hikes (a very similar situation like we had in 4Q18). When asked whether 50bsp hikes could be on the table, the chair explained that the FOMC has not made decision to front-load hikes and will keep an eye on incoming inflation data to determine their policy actions going forward, but of course added that every incoming meeting was live. Overall, the Fed was hawkish, but due to very strong pre-positioning and close to peak hawkishness priced for STIR markets the meeting saw a ‘sell-the-fact’ reaction across major asset classes. 2. Global & Domestic Economy As the reserve currency, the USD’s global usage means it’s usually inversely correlated to the global economy and global trade. The USD usually appreciates when growth & inflation slows (disinflation) and depreciates when growth & inflation accelerates (reflation). Thus, current expectations of a cyclical slowdown are a positive driver for the Dollar. Incoming data will be watched in relation to the ‘Fed Put’ as there are many similarities between now and 4Q18, where the Fed were also tightened into a slowdown. If growth data slows and the Fed stays hawkish it’s a positive for the USD, however if the Fed pivots dovish that’ll be a negative driver for the USD. 3. CFTC Analysis The USD’s med-term bias remains bullish but positioning for large specs and asset managers are close to multiyear highs. That always increases risks of short-term corrections against the underlying trend. As the med-term bias is still bullish we don’t want to necessarily sell the USD into a slowing growth environment (see notes above), so we could rather opt to buy it versus weaker currencies which also seems stretched long (CAD comes to mind). 4. The Week Ahead The USD had a solid week, trimming prior losses and getting close to the top of recent highs. The upside made sense from a technical perspective, after bouncing from key support around 97.70, but we do think there was more behind the upside. As the USD is usually inversely correlated to the growth outlook, the slowing in a few key economic data points didn’t bode well for the growth outlook. Despite another solid jobs report, other growth metrics slowed (Personal Income, Personal Consumption, ISM Mfg PMI) which adds to other data which has also been slowing down (Retail Sales, Industrial Production, Consumer Sentiment and Confidence). All of this doesn’t mean a recession is imminent (even though the infamous 2s10s yield spread has inverted), it simply means that the expected slowdown in growth is showing up, but it’s showing a faster than expected move, which is important. After the dismal ISM Mfg PMI report (where the headline slowed more than expected while Prices Paid jolted higher – a typical stagflation print), the incoming ISM Services PMI print on Tuesday will be an important one to keep on the radar. As the Services sector makes up close to 70% of GDP, any big surprises (either good or bad) will get attention from the market. It’s important to see the USD in the right context though. Usually, bad data should be bad for the USD as it means less need for tightening policy from the Fed, but in the current context the focus is on growth, where an aggressive Fed mixed with a slowing economy usually sees a positive expected return for the global reserve currency. With that context in mind, the FOMC meeting minutes could ‘spook’ markets even further, but that seems like a stretched after so many Fed speakers voiced their opinions after the meeting. Geopolitical risks are still on the radar, and as the USD is a safe haven, any major escalations (expected to be USD positive) or de-escalations (expected to be USD negative) will also be in focus. CAD FUNDAMENTAL BIAS: NEUTRAL 1. Monetary Policy The BoC did not surprise at their March meeting by hiking rates to 0.50% from 0.25% and continuing the reinvestment phase regarding asset purchases. The bank noted that the Russia/Ukraine war was a new major uncertainty for the economy and that as a result inflation is now expected to be higher in the near-term. They were optimistic about the growth outlook though and reiterated that it expects further interest rate rises will be needed. On the QT side, Gov Macklem noted that around 40% of the bank's bond holdings were due to mature within two years, and suggested that balance sheet could shrink quickly, and also added that they will discuss ending the reinvestment phase and starting QT at the April meeting. The Governor also said he didn’t rule out the potential for 50bsp rate rises as oil is putting upside pressure on CPI , noting that oil prices around $110 per barrel could add another percentage point to inflation . With markets implying close to another 8 hikes this year, we remain cautious on the currency as a slowing US and Canadian economy means the bank could struggle to maintain its current hawkish path in the weeks and months ahead. 2. Intermarket Analysis Considerations Oil’s impressive post-covid recovery has been driven by factors such as supply & demand (OPEC’s production cuts), strong global demand recovery, and of course ‘higher for longer’ inflation . The geopolitical crisis saw upside in WTI that reached levels last seen since in 2008. At these levels the risk to demand destruction and stagflation is high which means we remain cautious of oil in the med-term . Reason for that view is: Synchronised policy tightening from DM central banks targeting demand, slowing growth, consensus that is very long oil , steep backwardation curve (usually sees negative forward returns), heightened implied volatility . Even though we remain cautious on oil , the geopolitical risks remains a key focus for oil and thus for Petro-currencies like the CAD and NOK (even though the CAD-Oil correlation has been hit and miss). 3. Global Risk Outlook As a high-beta currency, the CAD usually benefits from overall positive risk sentiment as well as environments that benefit pro-cyclical assets. Thus, both short-term (immediate) and med-term (underlying) risk sentiment will always be a key consideration for the CAD. 4. CFTC Analysis Very bullish positioning signals with large specs and leveraged funds trimming shorts and asset managers adding a big 20K net-longs. It seems markets are warning to the idea of a 50bsp hike from the BoC after recent BoC comments. We continue to think recent price action is potentially setting up a similar path compared to April and Oct 2021 where markets were too aggressive and optimistic to price in upside for the CAD, only to then see majority of it unwind later. We’ll use any outsized strength for AUDCAD long opportunities. 5. The Week Ahead There are two key economic releases in focus for the CAD this week with the Business Outlook Survey coming up on Monday and the Jobs report on Friday. With recent comments from the BoC turning up the hawkish rhetoric, the data this week will be eyed to get a better sense of whether the BoC will move by 25bsp or 50bsp at their next meeting. For the Business Outlook Survey markets participants are expecting a solid price due to increased commodity prices after the war broke out. Furthermore, the markets are looking for a continuation in the job gains, even though we’ve explained before that the previous print wasn’t all that it was made out to be with net-job gains not as spectacular as some made it out to be. After Friday’s solid US NFP, and after the recent BoC comments the jobs print and the Business Outlook Survey could be enough to push STIR markets over the edge and start pricing in a 50bsp. Even though that can certainly be positive for currency, we don’t have appetite to chase the CAD higher as it’s seen a lot of one-sided upsides which does make it vulnerable to correction. Our preferred longs are AUDCAD and USDCAD but waiting for a catalyst to trade looks like the best course of action right now.
by thunderpips
1
USDCAD for a new low 🦐USDCAD on the daily after the double top is testing a weekly support. The market attempted to break the 0.618 weekly Fibonacci level with 2 false breakouts and moved lower to the support structure. After a series of red candles, we can expect anyway some retracement to the upside before a possible break. How can we approach this scenario? I will wait for a potential break of the structure and in that case i ll move to the 4h chart. On that timeframe, i will check for an entry point according to Plancton's strategy rules and set a nice short order. --–– Follow the Shrimp 🦐 Keep in mind. 🟣 Purple structure -> Monthly structure. 🔴 Red structure -> Weekly structure. 🔵 Blue structure -> Daily structure. 🟡 Yellow structure -> 4h structure. ⚫️ Black structure -> <4h structure. Here is the Plancton0618 technical analysis , please comment below if you have any question. The ENTRY in the market will be taken only if the condition of the Plancton0618 strategy will trigger
Short
by InkyGrip
USDCAD potential for bounce! | 4th April 2022Prices are at a pivot . We see the potential for a bounce from our Pivot at 78.6% Fibonacci retracement towards our Take Profit at 1.25938 in line with 38.2% Fibonacci retracement and 61.8% Fibonacci Projection . RSI is on bullish momentum. Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary, and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interest arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed on the website.
Long
by FXCM
1
USDCAD potential for bounce! | 4th April 2022Prices are at a pivot. We see the potential for a bounce from our Pivot at 78.6% Fibonacci retracement towards our Take Profit at 1.25938 in line with 38.2% Fibonacci retracement and 61.8% Fibonacci Projection. RSI is on bullish momentum. Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary, and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interest arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed on the website.
Long
by Rockqet
USDCAD - OIL , U.S ECONOMIC DATA WITH TECHNICAL LEVELS- Some of the most important data for USD will be released this week. Among them, JOLTS job openings, CB consumer confidence, ADP - non farm employment change, FINAL GDP q / q, crude oil inventories, Core pce price index, ism manufacturing index, NFP are the most important DATA. - The OPEC MEETING is scheduled for this week. Also important indicator data for CAD, GDP, MANUFACTURING PMI, is due to be released this Friday. - DXY is currently at 97.85 LEVEL. USD has been WEAK for the last few days. Also, the CAD FEATURE has been down to 0.7986 LEVEL. However, CAD is becoming WEAK compared to DXY due to OIL WEAKNESS. USDCAD PRICE is TUCHING IN DYNAMIC S / R LEVELS. - Currently we see the OVERALL MARKET RISK OFF. Also STOKES are getting RED. VIX UP is becoming. Also COMMODITIES are starting to DOWN right now. - OIL PRICE is currently down a bit. It will inevitably affect CAD. If so, USDCAD could be moving to the BUY in the next few days. - USDCAD PRICE can go to 1.2466 LEVEL before UP. Then the USDCAD PRICE can be UP again up to 1.2656 LEVEL. The USD may be slightly STRONG in the coming days due to the MARKET SENTIMENT. The OIL PRICE applies to USDCAD, and the decisions made at OPEC MEETING will have the greatest impact on USDCAD.
by benny_marshall
USD CAD - FUNDAMENTAL DRIVERSUSD FUNDAMENTAL BIAS: BULLISH 1. Monetary Policy In March the Fed delivered on a 25bsp hike as expected with Fed’s Bullard the only dissenter voting for a 50bsp hike. The Dot Plot saw a big upgrade from 3 hikes (Dec) to 7 hikes for 2022, with the FFR seen reaching 2.75%- 3.0% in 2023 before falling in 2024. They did however lower their neutral rate from 2.5% to 2.4% which were a negative. Inflation forecasts for 2022 were raised to 4.1% (previous 2.7%) but med-term inflation saw less aggressive upgrades. Even though the overall message and projections were hawkish, the fact that GDP estimates were lowered to 2.8% from 4.0% shows the Fed expects their actions to impact demand and also reflect some of the recent geopolitical uncertainties. The Fed didn’t share new details on QT but noted that the decision to start selling assets will be made at a coming meeting (markets consensus sees a July start as likely) and added that good progress in QT discussions means a May announcement is likely. During the presser the Chair expressed his view that the economy is doing really well and, should be more than able to withstand the incoming rate hikes (a very similar situation like we had in 4Q18). When asked whether 50bsp hikes could be on the table, the chair explained that the FOMC has not made decision to front-load hikes and will keep an eye on incoming inflation data to determine their policy actions going forward, but of course added that every incoming meeting was live. Overall, the Fed was hawkish, but due to very strong pre-positioning and close to peak hawkishness priced for STIR markets the meeting saw a ‘sell-the-fact’ reaction across major asset classes. 2. Global & Domestic Economy As the reserve currency, the USD’s global usage means it’s usually inversely correlated to the global economy and global trade. The USD usually appreciates when growth & inflation slow (disinflation) and depreciates when growth & inflation accelerates (reflation). Thus, current expectations of a cyclical slowdown (and possible stagflation) are good for the Dollar. Incoming data will be watched in relation to the ‘Fed Put’ as there are many similarities between now and 4Q18, where the Fed were also tightening into a slowdown. If growth data slows and the Fed stays hawkish it’s a positive for the USD, if the Fed pivots dovish that’ll be a negative for the USD. 3. CFTC Analysis Overall net-long positioning was a risk for the USD going into the March FOMC, where due to very strong performance in recent weeks, there was a high bar for a hawkish Fed to see a sustained rally in the USD. Participants are mixed in their allocations with Large Specs and Asset Managers still holding big net-longs, but leverage funds continue to increase shorts. The USD is in a tough spot right now, as short-term the odds of some unwind likely as markets now price in >8 hikes by Dec, but med-term bullish drivers have not changed. 4. The Week Ahead It’s the first Friday of the new month which means it’s US jobs week, and the data will be eyed as it will give further insights into how fast growth is slowing, and whether the data shows further signs of a possible stagflation environment in the weeks ahead. Apart from NFP, we also have PCE data in focus, as well as important growth input data such as Consumer Confidence and Personal Income and Consumption. The Dollar usually has an inverse correlation to global growth and usually has a positive expected return during periods of disinflation and stagflation (keep in mind that forward returns are much stronger for periods of disinflation compared to stagflation). Thus, if growth data or employment data shows bigger-than-expected downside while inflation data shows bigger-than-expected upside should see further yield curve flattening which should be supportive for the USD. We’ll also be keeping an eye on further geopolitical developments, where the USD’s safe haven status will play a role in possible short-term directional moves as well. It’s worth noting that the USD is still close to cycle highs and with STIR markets now pricing in >8 hikes and odds of a 50bsp hike close to 80% it does mean the USD could be vulnerable to corrective price action as it has not been able to take advantage of any meaningful upside alongside yields or STIR markets. When something doesn’t rally on positive news that usually tells us something, which in this case potentially shows us that a lot of upside has been priced in for the USD and if anything happens that reduces STIR market pricing it could have a asymmetric reaction to the downside. CAD FUNDAMENTAL BIAS: NEUTRAL 1. Monetary Policy The BoC did not surprise at their March meeting by hiking rates to 0.50% from 0.25% and continuing the reinvestment phase regarding asset purchases. The bank noted that the Russia/Ukraine war was a new major uncertainty for the economy and that as a result inflation is now expected to be higher in the near-term. They were optimistic about the growth outlook though and reiterated that it expects further interest rate rises will be needed. On the QT side, Gov Macklem noted that around 40% of the bank's bond holdings were due to mature within two years, and suggested that balance sheet could shrink quickly, and also added that they will discuss ending the reinvestment phase and starting QT at the April meeting. The Governor also said he didn’t rule out the potential for 50bsp rate rises as oil is putting upside pressure on oil , noting that oil prices around $110 per barrel could add another percentage point to inflation . With markets implying close to another 5 hikes this year, we remain cautious on the currency as a slowing US and Canadian economy means the bank should struggle to maintain its current hawkish path in the weeks and months ahead. 2. Intermarket Analysis Considerations Oil’s massive post-covid recovery has been impressive, driven by various factors such as supply & demand (OPEC’s production cuts), strong global demand recovery, and of course ‘higher for longer’ than expected inflation . The geopolitical crisis the world is facing right now have opened up a big push higher in WTI, trading at levels last seen since 2008. With oil prices at these levels the risk to demand destruction and stagflation is higher than ever and means we remain cautious of oil in the med-term . Reason for that view is: Synchronised policy tightening from DM central banks targeting demand, slowing growth and inflation , a consensus that is very long oil (growing calls for $100 WTI), very steep backwardation futures curve which usually sees negative forward returns, heightened implied volatility . However, recent geopolitical risks have been a key focus point for oil and means escalation and de-escalation will be important to watch. OPEC+ will also be in focus next week but the cartel is not expected to announce any changes to their output plans. 3. Global Risk Outlook As a high-beta currency, the CAD usually benefits from overall positive risk sentiment as well as environments that benefit pro-cyclical assets. Thus, both short-term (immediate) and med-term (underlying) risk sentiment will always be a key consideration for the CAD. 4. CFTC Analysis Large Specs (big increase in net-shorts) and Asset Managers (big increase in net-longs) are at odds with recent positioning changes. We continue to think the recent price action and positioning data has seen the CAD take a very similar path compared to April and Oct 2021 where markets were too aggressive and optimistic to price in upside for the CAD, only to then see majority of it unwind. However, oil prices, inflation and recent hawkish BoC comments remain in focus as keys intermarket drivers, albeit the oil correlation has been hit and miss. 5. The Week Ahead The data schedule is feather light for the CAD this week. We continue to remain cautious on the CAD and despite continued calls for a roaring economy we do not share the optimism. The recent jobs print, even though it was positive at face value, was not that impressive when incorporating the Omicron-related drop. Furthermore, even though inflation were higher than expected, it wasn’t the type of upside scare we’ve seen in other economies like the US, UK and EU. The CAD jolted higher on Friday with strong language from the BoC deputy governor who talked up more aggressive policy in the face of higher inflation . However, they also shared our concerns by noting that the levels of current debt levels will make aggressive hikes problematic due to current debt levels. If expectations for a slowdown in the US and Canadian economies are correct, it increases the probability that the BoC will need to turn dovish in coming months and means we doubt whether the bank will be able to get close to the >8 hikes priced in by STIR markets. Thus, we continue to look for upside in the AUDCAD on a med-term basis, but in the short-term we are cautious of some corrective price action after the one-sided upside we saw recently, so just keep that in mind.
by thunderpips
2
Today’s Notable Sentiment ShiftsCAD – The Canadian dollar strengthened to its highest level in nearly five months against USD on Wednesday as oil prices rose and investors rebalanced portfolios for the end of Q1. KnightsbridgeFX succinctly noted that “We are seeing some month-end and quarter-end flows which are generally loonie-positive. Outside of that, we have seen a bit more strength in the oil markets.” Antipodeans – The Australian and New Zealand dollars paused to digest a month’s worth of hefty gains on Wednesday as markets waited to see if Russian talk of de-escalating its military operation in Ukraine actually bore fruit. Indeed, commenting on AUD’s performance, Reuters notes that “investors were content to bank the Aussie’s recent gains which have seen it reach five-month highs on the US dollar, a five-year peak on the euro and a seven-year peak on the yen.”
by thunderpips
1
USD CAD - FUNDAMENTAL DRIVERSUSD FUNDAMENTAL BIAS: BULLISH 1. Monetary Policy In March the Fed delivered on a 25bsp hike as expected with Fed’s Bullard the only dissenter voting for a 50bsp hike. The Dot Plot saw a big upgrade from 3 hikes (Dec) to 7 hikes for 2022, with the FFR seen reaching 2.75%- 3.0% in 2023 before falling in 2024. They did however lower their neutral rate from 2.5% to 2.4% which were a negative. Inflation forecasts for 2022 were raised to 4.1% (previous 2.7%) but med-term inflation saw less aggressive upgrades. Even though the overall message and projections were hawkish, the fact that GDP estimates were lowered to 2.8% from 4.0% shows the Fed expects their actions to impact demand and also reflect some of the recent geopolitical uncertainties. The Fed didn’t share new details on QT but noted that the decision to start selling assets will be made at a coming meeting (markets consensus sees a July start as likely) and added that good progress in QT discussions means a May announcement is likely. During the presser the Chair expressed his view that the economy is doing really well and, should be more than able to withstand the incoming rate hikes (a very similar situation like we had in 4Q18). When asked whether 50bsp hikes could be on the table, the chair explained that the FOMC has not made decision to front-load hikes and will keep an eye on incoming inflation data to determine their policy actions going forward, but of course added that every incoming meeting was live. Overall, the Fed was hawkish, but due to very strong pre-positioning and close to peak hawkishness priced for STIR markets the meeting saw a ‘sell-the-fact’ reaction across major asset classes. 2. Global & Domestic Economy As the reserve currency, the USD’s global usage means it’s usually inversely correlated to the global economy and global trade. The USD usually appreciates when growth & inflation slow (disinflation) and depreciates when growth & inflation accelerates (reflation). Thus, current expectations of a cyclical slowdown (and possible stagflation) are good for the Dollar. Incoming data will be watched in relation to the ‘Fed Put’ as there are many similarities between now and 4Q18, where the Fed were also tightening into a slowdown. If growth data slows and the Fed stays hawkish it’s a positive for the USD, if the Fed pivots dovish that’ll be a negative for the USD. 3. CFTC Analysis Overall net-long positioning was a risk for the USD going into the March FOMC, where due to very strong performance in recent weeks, there was a high bar for a hawkish Fed to see a sustained rally in the USD. Participants are mixed in their allocations with Large Specs and Asset Managers still holding big net-longs, but leverage funds continue to increase shorts. The USD is in a tough spot right now, as short-term the odds of some unwind likely as markets now price in >8 hikes by Dec, but med-term bullish drivers have not changed. 4. The Week Ahead It’s the first Friday of the new month which means it’s US jobs week, and the data will be eyed as it will give further insights into how fast growth is slowing, and whether the data shows further signs of a possible stagflation environment in the weeks ahead. Apart from NFP, we also have PCE data in focus, as well as important growth input data such as Consumer Confidence and Personal Income and Consumption. The Dollar usually has an inverse correlation to global growth and usually has a positive expected return during periods of disinflation and stagflation (keep in mind that forward returns are much stronger for periods of disinflation compared to stagflation). Thus, if growth data or employment data shows bigger-than-expected downside while inflation data shows bigger-than-expected upside should see further yield curve flattening which should be supportive for the USD. We’ll also be keeping an eye on further geopolitical developments, where the USD’s safe haven status will play a role in possible short-term directional moves as well. It’s worth noting that the USD is still close to cycle highs and with STIR markets now pricing in >8 hikes and odds of a 50bsp hike close to 80% it does mean the USD could be vulnerable to corrective price action as it has not been able to take advantage of any meaningful upside alongside yields or STIR markets. When something doesn’t rally on positive news that usually tells us something, which in this case potentially shows us that a lot of upside has been priced in for the USD and if anything happens that reduces STIR market pricing it could have a asymmetric reaction to the downside. CAD FUNDAMENTAL BIAS: NEUTRAL 1. Monetary Policy The BoC did not surprise at their March meeting by hiking rates to 0.50% from 0.25% and continuing the reinvestment phase regarding asset purchases. The bank noted that the Russia/Ukraine war was a new major uncertainty for the economy and that as a result inflation is now expected to be higher in the near-term. They were optimistic about the growth outlook though and reiterated that it expects further interest rate rises will be needed. On the QT side, Gov Macklem noted that around 40% of the bank's bond holdings were due to mature within two years, and suggested that balance sheet could shrink quickly, and also added that they will discuss ending the reinvestment phase and starting QT at the April meeting. The Governor also said he didn’t rule out the potential for 50bsp rate rises as oil is putting upside pressure on oil , noting that oil prices around $110 per barrel could add another percentage point to inflation . With markets implying close to another 5 hikes this year, we remain cautious on the currency as a slowing US and Canadian economy means the bank should struggle to maintain its current hawkish path in the weeks and months ahead. 2. Intermarket Analysis Considerations Oil’s massive post-covid recovery has been impressive, driven by various factors such as supply & demand (OPEC’s production cuts), strong global demand recovery, and of course ‘higher for longer’ than expected inflation . The geopolitical crisis the world is facing right now have opened up a big push higher in WTI, trading at levels last seen since 2008. With oil prices at these levels the risk to demand destruction and stagflation is higher than ever and means we remain cautious of oil in the med-term . Reason for that view is: Synchronised policy tightening from DM central banks targeting demand, slowing growth and inflation , a consensus that is very long oil (growing calls for $100 WTI), very steep backwardation futures curve which usually sees negative forward returns, heightened implied volatility . However, recent geopolitical risks have been a key focus point for oil and means escalation and de-escalation will be important to watch. OPEC+ will also be in focus next week but the cartel is not expected to announce any changes to their output plans. 3. Global Risk Outlook As a high-beta currency, the CAD usually benefits from overall positive risk sentiment as well as environments that benefit pro-cyclical assets. Thus, both short-term (immediate) and med-term (underlying) risk sentiment will always be a key consideration for the CAD. 4. CFTC Analysis Large Specs (big increase in net-shorts) and Asset Managers (big increase in net-longs) are at odds with recent positioning changes. We continue to think the recent price action and positioning data has seen the CAD take a very similar path compared to April and Oct 2021 where markets were too aggressive and optimistic to price in upside for the CAD, only to then see majority of it unwind. However, oil prices, inflation and recent hawkish BoC comments remain in focus as keys intermarket drivers, albeit the oil correlation has been hit and miss. 5. The Week Ahead The data schedule is feather light for the CAD this week. We continue to remain cautious on the CAD and despite continued calls for a roaring economy we do not share the optimism. The recent jobs print, even though it was positive at face value, was not that impressive when incorporating the Omicron-related drop. Furthermore, even though inflation were higher than expected, it wasn’t the type of upside scare we’ve seen in other economies like the US, UK and EU. The CAD jolted higher on Friday with strong language from the BoC deputy governor who talked up more aggressive policy in the face of higher inflation . However, they also shared our concerns by noting that the levels of current debt levels will make aggressive hikes problematic due to current debt levels. If expectations for a slowdown in the US and Canadian economies are correct, it increases the probability that the BoC will need to turn dovish in coming months and means we doubt whether the bank will be able to get close to the >8 hikes priced in by STIR markets. Thus, we continue to look for upside in the AUDCAD on a med-term basis, but in the short-term we are cautious of some corrective price action after the one-sided upside we saw recently, so just keep that in mind.
by thunderpips
1
USDCAD SHORT Intraday Welcome back! Here's an analysis of this pair! **USDCAD - Intraday SHORT Opportunity. Rules for entry: Downtrend daily and 4 hr., price in strong reversal zone, corrective structure from downtrend, wick rejection, top of 4 hr. channel...apply your own rules according to the strategy you use and you should find an opportunity. Good luck! Please support this idea with a LIKE and COMMENT if you find it useful and Click "Follow" on our profile if you'd like these trade ideas delivered straight to your email in the future. Thanks for your continued support! Brian & Kenya Horton, BK Forex Academy
Short
by BKTradingAcademy
USDCAD potential for bounce! | 23rd march 2022Prices are abiding by a daily ascending trendline. We see the potential for a bounce from our trendline towards our Take profit at 1.26240 in line with 100% Fibonacci Projection and 23.6% Fibonacci retracement. RSI is on bullish momentum, further supporting our bullish bias. Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary, and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interest arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed on the website.
Long
by Rockqet
Today’s Notable Sentiment ShiftsCAD – The Canadian dollar strengthened against its US counterpart for a six straight day on Tuesday as money markets bet that the Bank of Canada would be just as aggressive as the Federal Reserve in hiking interest rates. BMO Capital Markets notes that “in the wake of last week’s FOMC, we have seen the rise in Canadian interest rates mirror that in the US and oil has remained above $100 a barrel. The market is finally buying the loonie on the back of higher oil prices.”
by thunderpips
USD CAD - FUNDAMENTAL DRIVERSUSD FUNDAMENTAL BIAS: BULLISH 1. Monetary Policy At their March meeting the Fed delivered on a 25bsp hike as expected with Fed’s Bullard the only dissenter voting for a 50bsp hike. The Dot Plot saw a big upgrade from 3 hikes (Dec) to 7 hikes for 2022, with the FFR seen reaching 2.75%-3.0% in 2023 before falling in 2024. The Fed did however lower their neutral rate from 2.5% to 2.4% which were a bit of a negative. Inflation forecasts for 2022 were raised to 4.1% (previous 2.7%) but med-term inflation saw less aggressive upgrades. Even though the overall message and projections were definitely hawkish, the fact that GDP estimates were lowered to 2.8% from 4.0% shows a Fed that expects their actions to impact demand and could also be incorporating some of the recent geopolitical uncertainties. The Fed didn’t provide any new details on QT but did note that the decision to start selling assets will be made at a coming meeting (markets consensus sees a July start as likely) but did add that the FOMC made good progress in their QT discussion with a May announcement very likely. During the presser the Chair expressed his view that the economy is doing really well and, in his view, will be more than able to withstand the incoming rate hikes (a very similar situation like we had in 4Q18). When asked whether 50bsp hikes could be on the table, the chair explained that the FOMC has not made decision to front-load hikes and will keep an eye on incoming inflation data to determine their policy actions going forward, but of course added that every incoming meeting was live. Overall, the Fed was hawkish, but due to very strong pre-positioning and close to peak hawkishness priced for STIR markets the meeting saw a ‘sell-the-fact’ reaction across major asset classes. 2. Global & Domestic Economy As the reserve currency, the USD’s global usage means it’s usually inversely correlated to the global economy and global trade. The USD usually appreciates when growth & inflation slow (disinflation) and depreciates when growth & inflation accelerates (reflation). Thus, current expectations of a cyclical slowdown (and possible stagflation) are good for the Dollar. Incoming data will be watched in relation to the ‘Fed Put’ as there are many similarities between now and 4Q18, where the Fed were also tightening into a slowdown. If growth data slows and the Fed stays hawkish it’s a positive for the USD, once the Fed pivots dovish that’ll be a negative for the USD. 3. CFTC Analysis Overall net-long positioning was a risk for the USD going into the FOMC, where due to very strong performance in recent weeks, it was a very high bar for a hawkish Fed to see a sustained move higher in the USD before seeing a bit of a correction. Leveraged funds now hold a net-short in the USD, but unless geopolitics offer meaningful safe haven inflows or stagflation fears jump higher, some short-term downside is possible. 4. The Week Ahead The week ahead will be one the quietest ones we’ve had in a while on the economic data side. The main highlights will be incoming Fed speak after last week’s hawkish FOMC policy decision, with focus on whether we get any additional insights and opinions on the rate path, inflation and of course QT. With a lack of key data to give further insights into how fast growth is slowing, the stagflation narrative will probably get most of its cues from commodity prices. Keep in mind that the Dollar has an inverse correlation to global growth and usually has a positive expected return during periods of disinflation and stagflation. We’ll also be keeping an eye on further geopolitical developments, where the USD’s safe haven status will play a role in possible short-term directional moves as well. However, if we don’t see any major trending moves in commodities , and we don’t have any major geopolitical developments, the USD is still close to cycle highs and means it remains vulnerable to some profit taking and additional short-term corrective price action. Watching key support at 97.70 will be key as a break and close below that support arguably opens up room for a dive towards 97.00. Just keep in mind that the bias for the USD remains bullish in the med-term , so any moves lower are expected to be more tactical in nature, unless driven by specific catalysts of course. CAD FUNDAMENTAL BIAS: NEUTRAL 1. Monetary Policy The BoC did not surprise at their March meeting by hiking rates to 0.50% from 0.25% and continuing the reinvestment phase regarding asset purchases. The bank noted that the Russia/Ukraine war was a new major uncertainty for the economy and that as a result inflation is now expected to be higher in the near-term. They were optimistic about the growth outlook though and reiterated that it expects further interest rate rises will be needed. On the QT side, Gov Macklem noted that around 40% of the bank's bond holdings were due to mature within two years, and suggested that balance sheet could shrink quickly, and also added that they will discuss ending the reinvestment phase and starting QT at the April meeting. The Governor also said he didn’t rule out the potential for 50bsp rate rises as oil is putting upside pressure on oil , noting that oil prices around $110 per barrel could add another percentage point to inflation . With markets implying close to another 5 hikes this year, we remain cautious on the currency as a slowing US and Canadian economy means the bank should struggle to maintain it’s current hawkish path in the weeks and months ahead. 2. Intermarket Analysis Considerations Oil’s massive post-covid recovery has been impressive, driven by various factors such as supply & demand (OPEC’s production cuts), strong global demand recovery, and of course ‘higher for longer’ than expected inflation . The geopolitical crisis the world is facing right now have opened up a big push higher in WTI, trading at levels last seen since 2008 last week. With oil prices at these levels the risk to demand destruction and stagflation is higher than ever and means we remain cautious oil in the med-term . Reason for that view is: Synchronised policy tightening from DM central banks targeting demand, slowing growth and inflation , a consensus that is very long oil (growing calls for $100 WTI), very steep backwardation futures curve which usually sees negative forward returns, heightened implied volatility . However, recent geopolitical risks have been a key focus point for oil and means escalation and de-escalation will be important to watch. 3. Global Risk Outlook As a high-beta currency, the CAD usually benefits from overall positive risk sentiment as well as environments that benefit pro-cyclical assets. Thus, both short-term (immediate) and med-term (underlying) risk sentiment will always be a key consideration for the CAD. 4. CFTC Analysis We think the recent price action and positioning data has seen the CAD take a very similar path compared to April and Oct 2021 where markets were way too aggressive and optimistic to price in upside for the CAD, only to then see majority of it unwind. However, oil prices remain in focus as a key intermarket driver, albeit the correlation has been very hit and miss over recent weeks. 5. The Week Ahead The data schedule is feather light for the CAD this week. We continue to remain cautious on the CAD anddespite continued calls for a roaring economy we do not share the optimism. The recent jobs print, even though it was positive at face value, was not that impressive when incorporating the Omicron-related drop. Furthermore, even though inflation were higher than expected, it wasn’t the type of upside scare we’ve seen in other economies like the US, UK and EU. If expectations for a slowdown in the US and Canadian economies are correct, it increases the probability that the BoC will need to turn dovish in coming weeks and months and means we continue to look for upside in the AUDCAD on a med-term basis, but in the short-term we are cautious of some corrective price action after the one-sided upside we saw last week so just keep that in mind.
by thunderpips
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Ascending Triangle (USDCAD, Daily)The canadian dollar has a text book ascending triangle and is currently sitting at the support line. WIll wait for bullish signs in order to enter (i.e. an up bar closing near the highs). That will show buying interest at the level. If it breaks the trendline then I may look to short it. If I find a long trade then I'll hold for the breakout of the top of the ascending triangle in anticipation of a move higher. The idea being that the bias for these patterns is for it to breakout of the top of the triangle.
Long
by kosai19
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