Sive Morten
Special Consultant to the FPA
- Messages
- 18,564
Fundamentals
Situation on gold market shows slow progress, so we do not need big weekly update on it and covering by daily videos looks enough currently.
At the same time we have long-term setup on CAD that shows solid dynamic. So, today guys we again take a look at Loonie dollar and provide some specific fundamental new for CAD directly.
As Reuters reports - the Canadian dollar weakened against its U.S. counterpart on Friday, reducing its gains for the week as oil prices fell and domestic data showed a steep drop in home sales.
Canadian homes sales tumbled 9.1 percent in February from the previous month to hit their lowest level since November 2012, the Canadian Real Estate Association said. The home sales decline offset separate data showing a stronger-than-expected rise in Canadian manufacturing sales.
Factory sales were up by 1.0 percent in January from December, Statistics Canada said. Analysts surveyed by Reuters had forecast on average an increase of 0.4 percent.
The price of oil, one of Canada's major exports, retreated as worries about the global economy and robust U.S. production put a brake on prices. U.S. crude oil futures were down 1.1 percent at $57.95 a barrel.
The decline for the loonie on Friday came one day after Bank of Canada senior deputy governor Carolyn Wilkins said that rising global debt is slowing economic growth and making Canada, and the rest of the world, more vulnerable to another period of financial instability.
"A lot of noise in the market but not a lot movement today," said Rahim Madhavji, president at Knightsbridge Foreign Exchange. "It still comes down to interest rates and jobs for the longer term."
Data last Friday showed a second consecutive month of bumper job gains that quelled concerns that Canada's economy could be headed for a recession.
The Bank of Canada is unlikely to cut interest rates to support a flagging economy as long as job growth continues at a robust pace, an analysis of the central bank's response to past divergences in economic data suggests.
Canadian government bond prices were higher across the yield curve in sympathy with U.S. Treasuries after data showing U.S. manufacturing output fell for a second straight month in February.
CFTC data shows that net short position this week mostly stands the same:
Source: cftc.gov
Charting by Investing.com
Although on Friday we saw pullback of crude oil prices, we think that this is temporal situation. Longer-term picture looks bullish and upside action on crude oil should last for some time more.
This perfectly corresponds to our long-term trading plan on CAD. First and second parts are over - upside action and reversal. Now we're coming to final part of this trade - downside extension.
Technicals
Monthly
Since we've talked on CAD just last weekend - monthly chart doesn't show big changes. After minor retracement back inside the engulfing pattern - loonie has turned down precisely where we've expected.
Recall that our discussion has started with strong bearish engulfing pattern by the close of January candle. Pattern stands at major 5/8 resistance. January black candle has closed below the lows of December, which could be treated as Reversal month as well. On a way down market also has tested YPP.
Strong support here stands at 1.2706 as YPS1 and 1.22-1.25 K-area.
For the monthly chart, this is tactical setup, because it doesn't suggest too extended targets, as they should stand somewhere inside recent upside swing. But... this is for monthly time frame. For daily one this could be long-term direction which makes trading process easier.
As usual, first step that we're waiting for is minor pullback inside the body of engulfing pattern - and it is completed as we've mentioned above. Now we have bearish position already. Or, if you do not have it - do not upset, it is a lot of room to get it still. Now is second step of trading plan - downside extension.
Weekly
On the weekly chart market shows first week of downside action as soon as price has perfectly completed upside AB-CD at XOP target and formed "222" sell pattern.
Result of this week is bearish grabber, which suggests drop below recent lows and break of K-support area.
Grabber candle also could be used for short position taking if you want to.
Daily
So, as soon as upside XOP and reverse H&S pattern has been completed (there was DRPO "Sell" at top as well, if you remember) - CAD starts dropping. Now price hits first support area of 3/8 Fib level and neckline of former H&S.
Trend has turned bearish here. Since this action is weekly grabber, we could try to use it for bearish position against 1.3460 top.
Intraday
Here our downside DRPO is completed perfectly precisely at 50% Fib level - minimum required target of DRPO. Now, as downside action was smooth as well, we have opposite pattern - DRPO "Buy". It suggests upside retracement that should be greater than just 3/8.
It means that on 1H chart we could watch for upside XOP that agrees with 5/8 Fib level. It would be perfect if we get butterfly pattern as well.
Strong action on Friday also suggests that market should go above OP and 3/8 level. Once XOP will be completed, we get "222" Sell pattern and short entry setup:
Conclusion:
Canadian dollar provides very interesting setup now. Since setup is forming on monthly chart - it could provide weeks and weeks of clear direction for trading on daily time frame.
Next week our CAD journey continues. We should get second setup for short entry around 1.3385 area.
The technical portion of Sive's analysis owes a great deal to Joe DiNapoli's methods, and uses a number of Joe's proprietary indicators. Please note that Sive's analysis is his own view of the market and is not endorsed by Joe DiNapoli or any related companies.
Situation on gold market shows slow progress, so we do not need big weekly update on it and covering by daily videos looks enough currently.
At the same time we have long-term setup on CAD that shows solid dynamic. So, today guys we again take a look at Loonie dollar and provide some specific fundamental new for CAD directly.
As Reuters reports - the Canadian dollar weakened against its U.S. counterpart on Friday, reducing its gains for the week as oil prices fell and domestic data showed a steep drop in home sales.
Canadian homes sales tumbled 9.1 percent in February from the previous month to hit their lowest level since November 2012, the Canadian Real Estate Association said. The home sales decline offset separate data showing a stronger-than-expected rise in Canadian manufacturing sales.
Factory sales were up by 1.0 percent in January from December, Statistics Canada said. Analysts surveyed by Reuters had forecast on average an increase of 0.4 percent.
The price of oil, one of Canada's major exports, retreated as worries about the global economy and robust U.S. production put a brake on prices. U.S. crude oil futures were down 1.1 percent at $57.95 a barrel.
The decline for the loonie on Friday came one day after Bank of Canada senior deputy governor Carolyn Wilkins said that rising global debt is slowing economic growth and making Canada, and the rest of the world, more vulnerable to another period of financial instability.
"A lot of noise in the market but not a lot movement today," said Rahim Madhavji, president at Knightsbridge Foreign Exchange. "It still comes down to interest rates and jobs for the longer term."
Data last Friday showed a second consecutive month of bumper job gains that quelled concerns that Canada's economy could be headed for a recession.
The Bank of Canada is unlikely to cut interest rates to support a flagging economy as long as job growth continues at a robust pace, an analysis of the central bank's response to past divergences in economic data suggests.
Canadian government bond prices were higher across the yield curve in sympathy with U.S. Treasuries after data showing U.S. manufacturing output fell for a second straight month in February.
CFTC data shows that net short position this week mostly stands the same:
Source: cftc.gov
Charting by Investing.com
Although on Friday we saw pullback of crude oil prices, we think that this is temporal situation. Longer-term picture looks bullish and upside action on crude oil should last for some time more.
This perfectly corresponds to our long-term trading plan on CAD. First and second parts are over - upside action and reversal. Now we're coming to final part of this trade - downside extension.
Technicals
Monthly
Since we've talked on CAD just last weekend - monthly chart doesn't show big changes. After minor retracement back inside the engulfing pattern - loonie has turned down precisely where we've expected.
Recall that our discussion has started with strong bearish engulfing pattern by the close of January candle. Pattern stands at major 5/8 resistance. January black candle has closed below the lows of December, which could be treated as Reversal month as well. On a way down market also has tested YPP.
Strong support here stands at 1.2706 as YPS1 and 1.22-1.25 K-area.
For the monthly chart, this is tactical setup, because it doesn't suggest too extended targets, as they should stand somewhere inside recent upside swing. But... this is for monthly time frame. For daily one this could be long-term direction which makes trading process easier.
As usual, first step that we're waiting for is minor pullback inside the body of engulfing pattern - and it is completed as we've mentioned above. Now we have bearish position already. Or, if you do not have it - do not upset, it is a lot of room to get it still. Now is second step of trading plan - downside extension.
Weekly
On the weekly chart market shows first week of downside action as soon as price has perfectly completed upside AB-CD at XOP target and formed "222" sell pattern.
Result of this week is bearish grabber, which suggests drop below recent lows and break of K-support area.
Grabber candle also could be used for short position taking if you want to.
Daily
So, as soon as upside XOP and reverse H&S pattern has been completed (there was DRPO "Sell" at top as well, if you remember) - CAD starts dropping. Now price hits first support area of 3/8 Fib level and neckline of former H&S.
Trend has turned bearish here. Since this action is weekly grabber, we could try to use it for bearish position against 1.3460 top.
Intraday
Here our downside DRPO is completed perfectly precisely at 50% Fib level - minimum required target of DRPO. Now, as downside action was smooth as well, we have opposite pattern - DRPO "Buy". It suggests upside retracement that should be greater than just 3/8.
It means that on 1H chart we could watch for upside XOP that agrees with 5/8 Fib level. It would be perfect if we get butterfly pattern as well.
Strong action on Friday also suggests that market should go above OP and 3/8 level. Once XOP will be completed, we get "222" Sell pattern and short entry setup:
Conclusion:
Canadian dollar provides very interesting setup now. Since setup is forming on monthly chart - it could provide weeks and weeks of clear direction for trading on daily time frame.
Next week our CAD journey continues. We should get second setup for short entry around 1.3385 area.
The technical portion of Sive's analysis owes a great deal to Joe DiNapoli's methods, and uses a number of Joe's proprietary indicators. Please note that Sive's analysis is his own view of the market and is not endorsed by Joe DiNapoli or any related companies.