Canadian Dollar Outlook:
- The Canadian dollar has benefited from a rebound in risk appetite as well as another higher push from energy prices.
- The January job report in Canada at the end of the week could shorten Loonie’s rally, if only temporarily.
- According to the IG Customer Sense IndexUSD / CAD rates has mixed prejudice soon.
CAD Next Oil, Stocks
The Canadian Dollar has a strong start to the week as global equity markets and energy prices continue to push higher. And while our view has remained consistent in recent weeks – that “continued gains in energy markets suggest that Canadian Dollar losses should be limited, suggesting that“ buy the soak ”opportunities are forming in the CAD crossovers” – the end of this. a week can give such an opportunity.
Incoming Canadian labor market figures are expected to be quite disappointing, with a contraction in both headline job growth as well as a jump in the unemployment rate. If the January jobs report in Canada – one driven by temporary factors such as the rise in infections of COVID-19 omicron varieties – proves disappointing, it may well once again set up a “buy down” opportunity in CAD / JPY exchange rates. or vice versa. , ‘selling the rally’ in USD / CAD exchange rates.
CAD / JPY Technical Analysis: Daily Diagram (January 2021 to January 2022) (Diagram 1)
CAD / JPY rates have not advanced much in either direction over the past week, although it should be noted that they continue to trade within the limits of a symmetrical triangle that has been cut out since September 2021. How much the previous move was higher. , The ultimate resolution of the symmetric triangle is viewed for a bullish break – consistent with the larger picture rally over the downtrend of the October 2007 highs (all-time highs) and December 2014 highs.
Momentum has started to recover, with CAD / JPY rates near closing above its daily 8-EMA for the first time since January 19. Daily MACD descent above its signal line is slowing down, while daily Slow Stocks have continued their climb. from the best-selling territory. CAD / JPY rates are still in the early stages of finding their basis for another attempt to climb through 92.00, finally “on track to return to its 2021 high at 93.02 in the coming weeks.”
USD / CAD Price Analysis Technique: Daily Diagram (January 2021 to January 2022) (Diagram 2)
USD / CAD exchange rates reversed lower after labeling the 38.2% Fibonacci retracement of the 2012 low / 2016 high range at 1.2758, suggesting that the accumulation of the upward trend of the June and October 2021 swing declines has been completed . While the jobs at the end of the week may prove to be a hindrance to more significant losses in the near future, there is a reasonable technical basis to suggest that a near-term high as was set against 1.2814, the January swing high. which was not achieved; a series of lower highs and lower lows have existed over the past month of trading. Finally, rallies are still looking to sell for a return to the June and October 2021 trend near 1.2500 in mid-February.
IG Customer Feelings Index: USD / CAD Forecast (January 31, 2022) (Chart 3)
USD / CAD: Retail data show that 55.71% of traders are net-long with the ratio of long-to-short traders at 1.26 to 1. The number of net-long traders is 16.07% higher than yesterday and 22.10% lower than last week, while the number of net-short traders is 15.10% higher than yesterday and 26.02% higher than last week.
We usually take the opposite view of crowd sentiment, and the fact that traders are neatly long suggests that USD / CAD prices will continue to fall.
Positioning is longer online than yesterday but shorter online than last week. The combination of current sentiment and recent changes gives us an additional mixed trading bias of USD / CAD.
— Written by Christopher Vecchio, CFA, Chief Strategist