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Forex Technical Analysis USDCAD : 18 December 2015

No Canadian dollar trend reversal yet

Canadian dollar has been weakening with falling oil prices. The inflation report on Friday is expected to indicate consumer prices rose in November. Will the Canadian dollar start strengthening against the US dollar?

Canadian economy grew 0.3% in the third quarter of 2015 after contracting in the first half of the year. The Bank of Canada left the interest rate unchanged at 0.5% at last policy meeting on December 2 after the GDP data were released the previous day. Policy makers stated that the growing external demand as US economic recovery continued should support country’s manufacturing sector, and accommodative monetary policy enables the rebalancing of the domestic economy away from heavy dependence on commodities export. The central bank expects the inflation will start climbing from the bottom of its target range of 1%-to-3% as inflationary effects of weaker national currency help offset disinflationary pressures from falling oil prices as well as lower investment and employment in energy sector. On Friday the inflation report is due and inflation is expected to rise in November. Meanwhile the Federal Reserve hiked the interest rates 0.25% on December 16, and after the decline on Wednesday the US dollar resumed the rise against major currencies. And the decline in oil prices resumed as the dollar strengthened and US crude oil inventories surged unexpectedly.

USDCAD

USDCAD has been rising after the Bank of Canada decision on December 2 to hold the interest rates at 0.5%. The Donchian channel is tilted upward, indicating an uptrend. The Parabolic indicator gives a buy signal. The RSI oscillator is rising and has crossed into the overbought zone, which doesn’t exclude continuation of the uptrend. The MACD indicator is above the signal line and the zero level which is a bullish signal. We expect the bullish momentum will continue after the price closes above the upper bound of Donchian channel at 1.3847. A pending order to buy can be placed above that level, with the stop loss below the last fractal low at 1.32924. After placing the pending order, the stop loss is to be moved to the next fractal low, following Parabolic signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. If the price meets the stop loss level without reaching the order, we recommend canceling the position: the market sustains internal changes which were not considered.

Position Buy
Buy stop above 1.3847
Stop loss below 1.32924

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