USDCAD – More Downside to Come?

USDCAD – More Downside to Come?

Chart Of The Day

Amidst all the tumult in the dollar, the loonie has been a relative bastion of calm for the past few days moving only 50 pips either way. However, the deeper trend in the pair continues to be down as it keeps testing the key 1.3600 support.

With oil remaining anchored near the $49/bbl the loonie is well supported for now and tomorrow’s Canadian Retail Sales and CPI data could give it another boost if the numbers beat expectations. Both inflation and Retail Sales are expected to rebound from depressed levels a month ago which could push the loonie through the 1.3600 towards a test of 1.3550 support.

EUR/CAD – Major Downside Opportunity

EUR/CAD – Major Downside Opportunity

Chart Of The Day

EUR/CAD – Major Downside Opportunity

Fundamentals

Between the weakness of the euro and strength of the Canadian dollar on Friday, EUR/CAD experienced a major downside break that opens up the opportunity for a deeper slide in the currency. While the Euro has been drifting lower, the Canadian dollar did not soar until the end of the week on the back game changing CPI figures. The annualized pace of consumer price growth in Canada hit 2.3%, its strongest level in 2 years. This was also the very first time in 2 years that CPI exceeded the Bank of Canada’s target. Considering that the BoC did not anticipate CPI reaching this target until the first quarter of 2015, this is big news that should cause the central bank to upgrade its economic forecasts and reconsider their monetary policy bias. The BoC does not meet for a few weeks but the prospect of a less dovish bias could drive the Canadian dollar higher. At the same time, euro is in play in the coming week with a heavy economic calendar that includes Tier 1 economic reports such as Flash PMIs and the German IFO report. If these releases surprise to the downside reinforcing the need for the ECB to ease, it could drive EUR/USD to 1.3500 / 1.3475, which would in turn drive EUR/CAD lower.

Technicals

From a technical perspective, the next wave in EUR/CAD’s downtrend has already begun with the break of the 200-day SMA at 1.4735. The currency pair has been hovering around this moving average for the past week and finally broke through it with Friday’s reports. There has also been a major head and shoulders pattern forming that broke earlier this month but the move did not really gain momentum. Now that the 200-day SMA has broken, we believe it creates a major downside opportunity. There is no support at this stage until the 2014 low near 1.4400 and more significantly the 38.2% Fibonnaci retracement of the August 2012 to March 2014 rally at 1.4230. The downtrend would be negated if EUR/CAD rises back above 1.48.

AUD/NZD – Back to the Downside?

AUD/NZD – Back to the Downside?

Chart Of The Day

Fundamentals

After an impressive run through the 1.0900 level, AUD/NZD has started to sputter as the short covering the in Aussie has run out of momentum. Although the RBA last week unequivocally stated that the central bank is moving to neutral rather than a dovish stance, investors remain skeptical about the strength of the recovery Down Under. The week’s critical Australian employment report could once again revive fears that the RBA would need to cut rates further if the data shows contraction for the third month in a row. If on the other hand the AU employment data prints positive it will indicate that RBA is right to end the easing and may spur a second round of short covering that could send AUD/NZD back to a test of recent highs above the 1.0900 level.

Technicals

AUD/NZD remains in a broad 1.0500-1.0900 range with the pair still holding on at the top end of the channel. A break above 1.0930 opens the path to a test of the key 1.1100 figure, while a break below 1.0730 creates the conditions for a run to the lower end of the channel at the 1.0500 area

EURUSD — More Downside? Forex Daily Technicals 3.26.13

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