บทที่ 15 08/29 USDCAD: Buy the Dips as There Is No Room for Decline in The Market
Abstract: Before the New York session on Tuesday, the USDCAD broke through the previous resistance of 1.3614 and then accelerated upward. Investors are waiting for U.S. economic data and Canadian economic growth data to seek new impetus.
Fundamentals
The market now expects Canada's GDP growth rate to slow down to 1.2% in the second quarter, which will provide more evidence for the Bank of Canada (BOC) that high interest rates are slowing down demand. Household goods consumption will be the main catalyst for an economic slowdown, while the weakness of the construction industry and net exports will also drag down economic growth. We expect Canada's GDP growth rate to drop by 0.1% in June, and the GDP growth rate will be weak again in July. The lower-than-expected growth data will convince the BOC to keep interest rates unchanged at 5%.
In the U.S., investors will pay attention to the U.S. non-farm employment data released on Friday. The market expects that the U.S. economy will create more than 170,000 jobs in July. Investors will look for trading opportunities around the USDCAD based on clues.
Technical Analysis
On Tuesday, the USDCAD continued to move up slowly in a structure of up-flat-up, which was in line with our expectation of the USDCAD's rise last week. Although it continued to rise before today's New York session, it declined due to the turnover data of JOLTs job vacancies in the U.S. in July. Indeed, the extent of the decline is still within the established scope of triangular consolidation. If the volatility of the USDCAD does not fall below the lower edge of the triangle consolidation, it is expected that the USDCAD will continue to complete the upward trend after undergoing more structural adjustments.
Current momentum indicators suggest that the recent rally may have been overdone. Specifically, the MACD is strengthening momentum above the 0-axis, with its fast EMA and slow EMA at their highest levels since March, while the Relative Strength Index continues to hover in the overbought zone at 70.
If bulls continue to push prices higher, the May and April peaks at 1.3655, and 1.3666 could be tested successively. A break above this resistance would see the USDCAD quickly test the psychological barrier of 1.3700, which held firm in December 2022. Subsequently, further gains could complete the top-bottom transition in the 1.3720-1.3740 range.
If the recent rebound fails, the price may first test the lower edge of the triangle consolidation, close to the threshold of 1.3600, and then test the recent support level of 1.3496. Breaking through this area may open the door to the support of 1.3385 in May. If the downward trend fails to stop here, the USDCAD may further retreat to 1.3300 at the bottom of April before the February low of 1.3262.
Overall, the USDCAD has been recovering strongly, and the recovery accelerated after the currency pair broke through the upward trend line connecting the high and low points from November to early May 2022. However, investors should not rule out the possibility of a pullback, because the price is close to the overbought condition. Due to the strong rally when writing this article, it is recommended to set the foundation.
Trading Recommendations
Trading direction: Long
Entry price: 1.3600
Target price: 1.3720
Stop loss: 1.3470
Deadline: 2023-09-12 23:55:00
Support: 1.3569, 1.3529, 1.3496
Resistance: 1.3636, 1.3653, 1.3694
