Market News & Analysis


Top Story

Canadian Data on the Right Path

Canada released its trade balance data for December earlier this morning, and the data was better than expected.  The overall Trade Balance was C$-0.4B vs C$-0.8B expected, and an upwardly revised C$-1.2B last.  This is the smallest deficit since a surplus in May 2019.  After a dovish BOC meeting on January 23rd,  Canadian data has beat expectations as Retail Sales, PPI, and Manufacturing PMI have come out better than expected.  However, with fears of a loss of demand of oil because of the Coronavirus and a plunge in the price of oil over the last 2 weeks, the USD/CAD has remained bid.

Last week, we discussed how it may be time for USD/CAD to pull back after a solid advance and resistance ahead. THAT DID NOT HAPPEN!! The pair continued to move higher. 

After breaking lower out of the long-term symmetrical triangle, the pair put in lows on December 31st, 2019 near 1.2950 and has been moving higher for the last month!  USD/CAD pushed higher above the rising bottom trendline and back into the triangle. The pair also pushed back above the 200 Day Moving Average at 1.3228.  USD/CAD is currently up against trendline resistance near 1.3300 with an RSI approaching overbought conditions.

 Source: Tradingview, City Index

On a 240-minute chart, we can see the dovish BOC was the first catalyst to push USD/CAD substantially through resistance to the point where the pair formed a rising wedge at horizontal resistance,  just above the 61.8% retracement level from the highs on November 20th to the lows on December 31st.  As the price of the Loonie depends a great deal on the price of oil, USD/CAD continued to move higher as the price of oil moved lower.  Above the 1.3300 trendline (on the daily), the next resistance level is a confluence of both the downward sloping triangle trendline on the daily and previous highs from November 20th near 1.3330. Horizontal support at the apex of the previously mentioned rising wedge near 1.3222.  The level also coincides with the 200 Day Moving Average.

Source: Tradingview, City Index

For your reference, below is a daily chart of Crude Futures.  Notice the dramatic decline from 66.00 on January 7th (Iran attack on US Bases in Iraq) to yesterdays lows near 49.31.  With today’s reversal, USD/CAD is able to pause its ascent. 

Source: Tradingview, NYMEX, City Index

Although data has been better as of late, the price of crude oil has been the driving force behind the price of USD/CAD over the past month.  And the price of Crude Oil has been guided by the fears of loss of demand due to the Coronavirus.  On Friday, both Canada and the US will release employment data.  If one is substantially better than the other, perhaps crude can pass the baton to economic data as the leader of price.


Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.

Important Notice:

Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.