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USDCAD Forms Head & Shoulder, Supported by Ichimoku

By 12/05/2017 No Comments

USDCAD Technical Analysis: The USD/CAD pair appears to have formed a Head and Shoulders chart pattern. While this could be a bearish reversal signal, the pair is supported by the daily Ichimoku cloud. What could be next for the pair? Let’s take a look at 3 key points of IDDA technique to find out; USDCAD technical, fundamental and market sentiment analysis.

 

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1- USDCAD Technical Analysis

After reaching the resistance level of 1.29 for the second time in a month beginning of December, USD/CAD plunged. It dropped to the 38% Fibonacci level and key pivot of 1.27. This could also be viewed as the neckline of a Head and Shoulder chart pattern. A confirmation below this level could be a bearish reversal indication. However, the pair remains supported by the upper band of Ichimoku cloud’s daily setup.

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USDCAD Technical Analysis - Daily Chart Ichimoku Head and Shoulder

USDCAD Technical Analysis – Daily Chart Ichimoku Head and Shoulder

 

Considering the fact that both 1.29 and 1.27 are very important levels for USDCAD technical analysis, it might be wise to remain in a wait-and-see mode. Especially since we have a high-risk event coming up. Which brings us to the second point of the IDDA; Fundamental analysis.

 

2- USDCAD Fundamental Analysis

 

Canada’s Side:

On the economic calendar today, the big event is Bank of Canada’s Rate Decision at 3 PM GMT.

The central bank is also widely expected to keep the rates unchanged at 1.00%. The latest monthly GDP reading and employment report surpassed expectations, so BOC policymakers could have reason to stay optimistic this time.

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US Side:

There is a lot going on in the US at the moment. From tax reform to the ongoing investigation into Trump administration’s dealings with Russia.

To top these off, we have the non-farm payrolls report coming up on Dec. 8, 1:30 pm GMT. The NFP release typically generates a lot of volatility for the USD crosses. Analysts are expecting hiring gains of 200K for November, which would be slower compared to October’s 261K gain.

 

3- USD/CAD Market Sentiment

The third point of IDDA looks at market sentiment. On Tuesday, retail trader data showed 46.9% of traders are net-long the USD/CAD pair. The number of traders net-long is 8.5% lower than yesterday and 9.4% lower from last week, while the number of traders net-short is 7.4% higher than yesterday and 15.6% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USDCAD prices may continue to rise. However, positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed USDCAD market sentiment bias.

 

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Final Thoughts…

As the 4th point of the IDDA technique, you must calculate your risk tolerance before deciding on the investment strategy that is suitable for your portfolio.

At the moment we have rather mixed signals from the main three points of the IDDA. Join our investing group to get the latest trading signals, stop-loss, take-profit and other limit order ideas. Our comprehensive signals will help you create a unique strategy for you, according to your risk tolerance.

 

xoxo

Kiana Danial

 

 

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