A1 Trading Company

May 27, 2021

USD/CAD Deep Dive: Retracement or Further Downside?

Bart Kurek

Check out my previous USDCAD deep dive here to see how we have progressed...

Price has progressed quite a bit since the latest USDCAD deep dive in March. Price has in fact continued pushing lower and continued the long-term downtrend. We have also broken through where I expected to see some consolidation (which we did) at 1.228, and we have now formed a new lowest support at 1.2025. This is now a 600-pip move which I have accurately predicted.

Price just rejected the 1.214 level, which lines up as the range's resistance which is just below the H8 bearish OB, an area where traders who went short at 1.214 have their stop losses, and hence price is likely to head towards there to take out their stop losses before reversing and continuing to the downside.

We're seeing a couple of mid-tier news releases coming out today and over the next couple of days, including the second Q1 2021 GDP reading, initial jobless claims, pending home sales, and core durable goods orders. If we see more employment or a higher GDP revision than expected, we may see some fast-paced moves to the downside.

Conversely, if we see the economy become weaker than expected, we could likely see price come back to previous support levels such as 1.228, if not higher at 1.238. Look out for the data first before taking any action in the market.

The downward trend in initial jobless claims continues. The overall trend of jobless claims is no doubt still moving in the right direction, and participants are still getting more and more confident that we could see a fast recovery of the labour market despite the dismal print we saw in the April NFP.

Following the previous FOMC meeting, and especially after the Minutes, more attention is placed on the labour data as the market tries to figure out when the point of “substantial progress” has been reached. However, with close to 8 million jobs still shy of pre-pandemic levels, there is still a very long way to go before it seems the FED will be impressed.

Looking at retail sentiment above, we can see that most traders are long on this pair. Retail traders are likely trying to find support at these nearby levels and push to the upside, likely to the channel's top at around 1.23.

Depending on the outcome of the next couple of news events, I am expecting price to move somewhat like the arrows above. I expect banks and other financial institutions to try and take out retail trader's positions that have gone short at 1.214. Once we see price reach the bearish OB, I will be looking to go short following successive price action confirmations of a rejection to this level.

A1 Edgefinder

All-In-One Fundamental Dashboard!
Simplify your fundamental analysis with our all-in-one fundamental dashboard! 
Discount code: READER

Learn more

Hotter CPI Shakes Markets

Yesterday's CPI numbers in the US caused considerable doubt in the expectations of a June rate cut. This morning's PPI came in lower than expected. But, it might not be enough to convince investors of a summer rate cut. EdgeFinder Analysis EURUSD is a -8 now on the EdgeFinder indicating dollar strength after the higher […]

Read More
Key Inflation Data Weighs on Investor Sentiment

Wednesday's inflation report in the US will be very pivotal in how USD-related assets will react for the next month. Higher CPI has investors worried of the Fed who still looks to cut rates at some point this year, but the inflationary trend could determine when these rate cuts come. EdgeFinder Analysis We have been […]

Read More
PMI Pushes Higher into Expansion

This morning's ISM Manufacturing PMI data came in higher than expected this month at 50.3. Here is what investors might be thinking in regards of the latest numbers, and why this could be bearish for the dollar. EdgeFinder Analysis USOil's score drops at the start of this month as the seasonality on the 10-year average […]

Read More
DISCLAIMER: All comments made by TraderNick’s Forex Group, LLC are for educational and informational purposes only. All comments should not be construed as investment advice regarding the purchase or sale of any securities or financial instrument of any kind. Please consult with your financial adviser before making an investment decision regarding any securities or financial instruments mentioned by TraderNick’s Forex Group, LLC. TraderNick’s Forex Group, LLC assumes no responsibility for your trading and investment results. All information on any of the platforms utilized by TraderNick’s Forex Group, LLC was obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. TraderNick’s Forex Group, LLC, its employees, representatives, and affiliated individuals may have a position or effect transactions in the securities and financial instruments herein and or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies. Trading of any type involves very high risk and may not be suitable for all investors. TraderNick’s Forex Group, LLC, its subsidiaries and all affiliated individuals assume no responsibility for your trading and investment result. Read our full disclaimer here
Home
Edgefinder
Signals
There is a significant degree of risk involved in trading securities. With respect to foreign exchange trading, there is considerable risk exposure, including but not limited to, leverage, creditworthiness, limited regulatory protection and market volatility that may substantially affect the price, or liquidity of a currency or currency pair. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts lose money when trading in CFDs. You should consider whether you can afford to take the high risk of losing your money.
homesmartphonelaptop-phonemenumenu-circle linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram