Matt Simpson, CFTe, MSTA
CityIndex
USDCAD continues to grind higher in line with the weekly bullish trend, and now seems on track to test 2014 highs.
Last week we saw it close to a 6-month high whilst remaining comfortably above the primary bullish trendline (from 2012 lows) with the 50 week MA also pointing upwards to confirm bullish momentum.
We have seen mild losses during Asia today but there are plenty of support levels for bulls to consider bullish setups in liken with this strong bullish trend.
With Canadian GDP is out today and an expectation of 0.2% growth m/m any upside surprise here should see USCAD retreat from the current highs. Friday also has Trade Balance figures but the data set is likely to be overshadowed by US Nonfarm Payroll and ISM Manufacturing Data.
Anyone considering picking any tops against the Greenback should also keep in mind that the USD has just seen 11 straight weeks of gains (a 4-decade record) and Large Speculative Net longs are also at a record highs. Conversely Canadian Dollar Futures are on the brink of hitting Net short after seeing further longs closed last week. Whilst this data is only released weekly and lags by 3-days, this is a lot of deep pockets to be betting against.
Therefor traders may be wise to see any weak US data (or strong CAD) as a gift for bulls to jump back on board the bullish trend at a 'better' price.
Yesterday produced a Spinning Top Doji below 1.118 resistance to suggest a weakness to the D1 move. At this stage a favour a pullback with 1.109 and 1.010 housing several levels of technical support. If we do see the pullback then I will be seeking bullish setups around these levels to trade in the direction of the dominant trend.
A break above this week’s highs should see direct gains towards 1.123 and 1.1275 (2014 highs). I don’t expect this level to break upon first attempt as we're likely to see profit taking, but overall I favour an upside break of this level sooner than later.
Only a break below 1.09 brings into question a much deeper retracement for the weekly chart.
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