EURUSD – Will it Ever Move?

EURUSD – Will it Ever Move?

Chart Of The Day

Trader this week can be forgiven if they think that their EURUSD charts are frozen. The pair has seen some of the tepid price action in months with average daily range barely reaching 50 pips. There is no doubt that currency traders are simply marking time as they await US labor market data tomorrow.

But euro has some structural problems of its own, not the least of which is the French election which appears to be split in a four-way tie and the persistently low inflation that is causing the ECB to rethink its QE taper move just yet.

The economic conditions in the EZ are actually improving as the low exchange rate and better labor demand fuel growth in the export-driven region, but the market is looking at interest rate differentials and if President Draghi continues to hint that taper will be delayed for another quarter or so, the EUR/USD could test the key 1.0500 support level once again.

USDCAD – End of the Move?

USDCAD – End of the Move?

Chart Of The Day

For the past few days, oil has come back to life rising from the lows of $47/bbl to above the key $50/bbl mark. The move has put some life into the loonie with USDCAD falling nearly 200 points since the start of the week, but unless the crude rally extends further loonies gains are likely to end here.

Canada has been able to weather the decline in crude relatively well, but its economy remains mired in a low growth environment and the central bank remains unabashedly dovish. Tomorrow’s Canadian GDP is expected to match last month’s 0.3% rate. Overall, Canadian GDP is expanding at 1.9% rate and unless the data tomorrow surprises to the upside it’s unlikely to provide much of a boost to the loonie.

USDCAD remains mired in a 1.3200-1.3400 range and is unlikely to break much beyond those barriers for the time being.

AUD/CAD – Prime for a Move Below 98 Cents

AUD/CAD – Prime for a Move Below 98 Cents

Chart Of The Day

AUD/CAD – Prime for a Move Below 98 Cents

We are short AUD/CAD ahead of tonight’s Australian employment report. Thanks to the rise in commodity prices and improvement in risk appetite, AUD was the day’s second best performing currency behind the CAD. However tonight’s employment report could erase the gains in the currency if they show deterioration in the economy. While the retail sector helped offset the losses in mining, Australian mining companies are now on the verge of bankruptcy and we could see thousands of layoffs over the next several months. According to the PMIs, weaker employment conditions were seen in the manufacturing and service sectors in the month of January. This signals that there was very little recovery in the labor market after net job losses in December. Given the importance of job growth, a soft report could trigger a significant reaction in AUD and highlight the contrasts between Australia and Canada’s economies. Crude prices jumped 5% today after Iran said they would support OPEC’s production freeze. While there has been some confusion as to whether “support” equals action, oil traders are simply relieved that the world’s fourth largest holder of oil reserves is willing to cooperate. After 3 years of Western sanctions, Iran is finally able to bring production up to competitive levels and they are on a campaign to increase output by at least a third this year. So it remains to seen how willing they really are to limiting output levels. With OPEC not scheduled to meet again until the summer, these positive headlines should fuel a stronger recovery in oil and in turn the Canadian dollar.

Technically AUD/CAD is trading between 2 important levels. The break below the 50-day SMA is significant in that it also took the currency pair below the 23.6% Fibonacci retracement of the 2008 to 2012 rally and the 50% Fib retracement of the 2012 to 2015 decline. There’s near term support at 0.9775 but for AUD/CAD the most important support is at 0.9715 because that’s where the monthly low and 100-day SMA coverage.

USD/CAD – High Probability Move to 1.20

USD/CAD – High Probability Move to 1.20

Chart Of The Day

USD/CAD – High Probability Move to 1.20

From a fundamental and technical perspective, we have strong reasons to believe that USD/CAD will fall to 1.20. The Canadian dollar was the day’s best performer, rising to its strongest level against the U.S. dollar in over 3 months. What is interesting about the move was that no economic data was released from Canada and oil prices declined. However, last week’s positive news flow continued to boost the currency. The price of crude increased 20% this month, leading the Bank of Canada to drop its bias to lower rates. In fact, on Friday, Bank of Canada Governor Poloz said he is also very optimistic about the U.S. economy and believes that the adverse effect of lower oil prices will be gone by the second half of the year. The pickup in consumer spending and trade activity should lead to a stronger GDP report and it is one of the main reasons why we are looking for USD/CAD to hit 1.20.

Technically, USD/CAD is trading comfortably below its 100-day SMA and with the 23.6% Fibonacci retracement of the 2007 to 2009 rally broken at 1.2120, there is no major support in the currency pair until 1.20. In fact, we have strong reasons to believe that if 1.20 breaks, next stop for USD/CAD will be 1.18.

BKSWING – Place Order to Sell EUR/CAD at 1.4185, Stop at 1.4245. Close half at 1.4155, move stop to breakeven, Close rest at 1.4025

Swing

CAD has become deeply oversold because of the decline in oil prices but based on the uptick in job growth, increase in core prices and weakness of the exchange rate, Wednesday’s Bank of Canada monetary policy statement could be less dovish, leading to a much needed rally in the Canadian dollar. Canada is widely expected to raise rates after the Fed and before the BoE which makes the CAD a bargain particularly against the euro. Additionally, retail sales should surprise to the upside as the uptick in wholesale sales and rebound in job growth point to stronger consumer spending. To take advantage of the potential opportunity, we are placing the following pending order:

1. Place Order to Sell EUR/CAD at 1.4185

Stop at 1.4245

Close half at 1.4155, move stop to break-even

Close rest at 1.4025

We still have the following pending orders:

2. Place order to Sell AUD/USD at 0.8616
Stop at 0.8676
Close 1/2 at 0.8586, move stop to breakeven
Close rest at 0.8450

3. Place order to Buy EUR/CHF at 1.2055
Stop at 1.1995
Close 1/2 at 1.2085, move stop to breakeven
Close rest at 1.2200

***Remember, if 2 orders trigger without one hitting T1 first, all other orders are canceled