USD/CAD - bullish outside day ahead of the extended weekend

  • USD shorts lighten up ahead of the extended weekend.
  • USD/CAD creates bullish outside day candle.

The greenback has witnessed a relief rally of sorts, seemingly due to shorts lightning up ahead of the extended weekend in the US (President's Day on Monday).

Further, demand for the CAD weakened after data released earlier today showed the Canadian manufacturing sales fell -0.3%m/m in December against market expectations of a +0.2% rise (prior: +3.8%). The core component also registered a drop of 0.4%.

Consequently, the USD/CAD pair has strengthened0.55 percent and was last seen trading at 1.2560 (50-day MA). More importantly, the today's high and low (1.2560, 1.2450) engulfing Thursday's price action, meaning the pair has created a bullish outside day candle.

A positive follow-through on Monday would add credence to the bullish outside day candle and signal a temporary low has been made at 1.2450 (today's low).

That said, the one-month 25 delta risk reversals show the USD call bias and CAD put bias has weakened. A week ago the risk reversal gauge stood at 0.25, while as of writing, it is at 0.05. A call gives the holder the right to buy at a set price, while the put gives the option holder the right to sell at a set price.

USD/CAD Technical Levels

A break above 1.2616 (100-day MA) would open up upside towards 1.2537 (Feb. 14 high) and 1.2689 (Feb. 9 high). On the other hand, a daily close below 1.2450 (today's low) could yield a re-test of the recent lows around 1.2250. A violation there would expose next major support at 1.2061 (Sep. 8 low).

  TREND INDEX OB/OS INDEX VOLATILY INDEX
15M Overbought Shrinking
1H Overbought High
4H Bearish Neutral Expanding
1D Bullish Neutral Expanding
1W Bearish Neutral Shrinking

 

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