Marshall Gittler
Trading Analysis
USD/CAD
The dollar traded mixed against its G10 peers during the European morning Friday. It was higher against EUR, CHF, SEK and GBP, in that order, while it was lower against AUD, NZD and CAD. The greenback was stable vs JPY and NOK.
“A stronger recovery is unlikely in the coming months” said ECB President Mario Draghi in an opening speech at the Frankfurt European Banking Congress. The ECB President stressed the importance to bring inflation back to target without delays as fast as possible. He also mentioned that monetary policy can and will do its part to achieve the inflation target and if its current policy is not effective enough or further risks to the inflation outlook materialize, the Bank will broaden the channels through which it intervenes by altering the size, pace and composition of their purchases. EUR/USD fell below 1.2500 at these comments and break below our support-turned-into-resistance of 1.2440. The move below that line could trigger further extensions towards the psychological line of 1.2400.
The People’s Bank of China cut its benchmark interest rates in response to a slowing domestic and global economy. The AUD and NZD that heavily depend on trade with China, surged approximately 1% each against the dollar. The Canadian dollar, also a commodity currency surged by the unexpected move due to expectations that the rate cut will spur demand and boost China’s economy.
USD/CAD slid during the European morning Friday, after finding resistance near 1.1330 (R1). The pair is now approaching the 200-period moving average, which lies near the support barrier of 1.1260 (S1) and near the black uptrend line taken from back the low of the 4th of September. Later in the day we get Canada’s CPI rate for October which is expected to remain at 2%, the BoC’s target. This could push the pair below that critical support zone and perhaps open the way towards the next support line, at 1.1165 (S2). Our near-term momentum studies support the notion. The RSI moved lower after finding resistance at its 50 line, while the MACD has topped slightly above zero, turned negative and crossed below its trigger line. However, as far as the broader trend is concerned, USD/CAD is still printing higher highs and higher lows above the long-term light blue line taken from back at the lows of September 2012, As a result, I believe that the long-term path of this pair is still to the upside and I would see any near-tern declines as a corrective phase at the time being.
Support: 1.1260 (S1), 1.1165 (S2), 1.1080 (S3) .
Resistance: 1.1330 (R1), 1.1400 (R2), 1.1470 (R3) .
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