Forex Investment and Currency Trading

Asia: USD/CAD was able to return above 1.0200 in overnight trading, as cross and fixing flows were noted catalysts for a move higher. There were no significant deal flows of note during the Asian session, as USD/CAD was confined to a rather narrow 1.0161-1.0186 trading range. Prices did exhibit a slow drift lower, but interbank names were noted buyers on such dips.London: The “buy on dips” mentality was reinforced during early London trading, as CAD weakness on the crosses pushed USD/CAD higher. Of note, purchases of GBP/CAD helped push USD/CAD above the 1.0200 level, with buying interest also noted in the EUR/CAD cross. This was followed by fixing flows that extended gains to the high at 1.0235 through the 10 o’clock window. However, once the fixing flows subsided, interbank accounts liquidated long USD/CAD positions as commodities such as crude oil moved higher. This, in turn, triggered a pullback to 1.0185 as technical valuations approached overbought levels.

U.S. GDP Data and Fed Speakers to Present Event Risk Today
There are no data releases scheduled in Canada today, leaving the final Q4 U.S. GDP report and a number of Fed speakers as the main event risks for the market to deal with. Market is forecasting an above consensus print of 0.7% for U.S. GDP (cons. 0.6%), which may trigger some light profit taking on short USD positions after EUR/USD approached this month’s secular high just above 1.5900 yesterday. In addition, the Fed’s Stern and Lockhart will speak on the economic outlook later today, and initial claims data is expected at 370K. Yesterday’s price action demonstrated that the market has not yet abandoned its bearish view for the USD, with rallies still viewed as a selling opportunity. 

Expected Trading Range 
1.0140 – 1.0230
       
Short-Term Outlook: Use Retracements as a Buying Opportunity
An hourly close below initial support at 1.0185 would trigger a retracement toward the 1.0131/1.0112 support zone before another sustained rally takes place. Resistance is located at 1.0224 and 1.0314 today (see page 3 for our short-term technical outlook).

Medium-Term Outlook: Next Support Levels Located at 1.0099 and 0.9973
USD/CAD posted a bullish trend reversal above a 1-year resistance trendline at 1.0025 on March 19. This has shifted the technical bias back to the topside, with support at 1.0099 and 0.9973 expected to attract buying interest for a move to resistance at 1.0343. Secondary resistance is located at 1.0468 and 1.0595 (see page 4 for our medium-term technical outlook).