The USDCAD saw a slew of economic data come out earlier today, painting a stronger-than-expected picture for the Canadian economy. Building permits for October were much stronger than expectations, surging 14.9% versus the forecasted -0.9% decline. Additionally, Capacity Utilization for the 3rd quarter came in at 78.5% (versus 77.6% revised from the last quarter), and Wholesale Trade for October rose by 0.1%, beating the -0.1% estimate.
Bank of Canada Policy and Market Reaction
This week, the Bank of Canada left rates unchanged at 2.25%. The price initially rose off the news as the statement was perceived to be less hawkish than expected. However, that rally was short-lived; willing sellers came in against the 100-hour moving average and successfully pushed the price back to the downside.
This behavior highlights a persistent technical theme. Finding willing sellers against its 100-hour moving average has been a pattern since the price broke back below that moving average on November 26. It corrected up to that level on that day, before rotating to the downside, starting a trend-like move that has taken the price from near 1.4100 to a low today of 1.3754. That move to the downside has now spanned 13 trading days – a long move over a relatively short period of time. The bias is to the downside.
Technical Analysis: The 100-Hour Moving Average
Along the journey to the downside, traders have continued to use the falling 100-hour moving average as a risk and bias-defining level. Each time the price tested this moving average on a corrective move, sellers leaned against the level. That occurred on December 2, again on December 4, and once more this week during Wednesday’s trade on December 10.
Needless to say, if the buyers are to take more control, they would need to get—and stay—above that 100-hour moving average. The moving average currently comes in at 1.38177.
On the downside, the next major target comes against a number of swing lows between 1.3721 and 1.3726. Lows within that area came in on August 8, August 10, September 1, and September 17 before starting the last run to the upside that peaked at 1.41398 on November 5.
Key Technical Levels to Watch
For traders mapping out their next moves, these are the critical levels defining the current bearish trend:
-
1.38177 (Resistance): This is where the 100-hour moving average currently comes in. A break above this level would give sellers some cause for pause (at least for a correction) and give buyers a victory they have not seen since the break of the moving average back on November 26.
-
1.3800 (Short-Term Risk): A closer short-term risk defining level would be Monday’s low, which comes in right around the 1.3800 level.
-
1.3759 (Current Price): The market is currently trading near recent lows, maintaining the pressure on the downside.
-
1.3721 – 1.3726 (Target): That area is where lows stalled on August 8, August 10, September 1, and September 17
Watch the Video Analysis:
In the video above, I (Greg Michalowski, author of Attacking Currency Trends) break down the technical factors driving the move lower in the USDCAD. I outline where the risk is and what the next targets are so you can plan the roadmap for your trades in that pair, now and going forward.
Be aware. Be prepared.
This article was written by Greg Michalowski at investinglive.com.