The USD/CAD appears to be headed for 1.3020
Jason Lubin December 23, 2020 6:45 AM
On Monday the USD/CAD broke out to the upside of a descending broadening pattern.
The US Dollar was bullish against all of its major pairs on Tuesday. On the US economic data front, GDP rose to +33.4% for the third quarter third reading (+33.1% expected), up from +33.1% in the third quarter second reading. The Conference Board's Consumer Confidence Index dropped to 88.6 on month in December (97.0 expected). from a revised 92.9 in November. Finally, Existing Homes Sales slipped to 6.69 million on month in November (6.70 million expected), from a revised 6.86 million in October.
On Wednesday, the Mortgage Bankers Association's Mortgage Applications data for the week ending December 18th is expected. Durable Goods Orders for the November preliminary reading is expected to increase 0.6% on month, compared to +1.3% in the October final reading. Initial Jobless Claims for the week ending December 19th are expected to decline to 880K, from 885K in the week before. Continuing Claims for the week ending December 12th are expected to rise to 5,560K, from 5,508K in the previous week. Personal Income for November is expected to decline 0.3% on month, compared to -0.7% in October. Personal Spending for November is expected to slip 0.2% on month, compared to +0.5% in October. The University of Michigan's Consumer Sentiment Index for the December final reading is expected fall to 81.1 on month, from 81.4 in the December preliminary reading. Finally, New Homes Sales for November are expected to decrease to 995K on month, from 999K in October.
The Euro was bearish against most of its major pairs with the exception of the NZD, AUD and GBP. In Europe, the January German GfK leading indicator of household confidence declined to -7.3, compared to -6.8 the previous month (revised from -6.7). It was expected at -7.6. Separately, the U.K. GDP rebounded by 16% in the third quarter in the second estimate, compared to +15.5% in the first reading, and after a decline of 19.8% in the previous quarter. In addition, the budget deficit soared to 30.8 billion pounds in November, compared with a deficit of 5.5 billion pounds a year earlier and a figure of 26.8 billion pounds expected by economists.
The Australian dollar was bearish against all of its major pairs.
Looking at a daily chart, on December 21st, the USD/CAD broke out to the upside of a short-term descending broadening pattern that began to form in mid-November. The simple moving averages (SMAs) are arranged in a bearish manner, as the 20-day SMA is below the 50-day SMA. The pair will likely continue its counter trend rebound and reach for the 50-day SMA around the 1.3020 resistance level. If price can manage to get above 1.3020, then it could rally towards 1.3145. On the other hand, if price slips then speculators should look to 1.2815 for support. If the pair fails to be supported at 1.2815, it could slip back down to its 52-week low around 1.2700. If price action falls below 1.2700, it would be a bearish signal as it would be a continuation of the long-term downtrend.
Source: GAIN Capital, TradingView
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