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Risk-on sentiment is on the rise to start off the week, making this short-term trend on USD/CAD something to watch as the market retraces.

Intermarket Snapshot

Equity Markets Bond Yields Commodities & Crypto
DAX: 13385.75 +0.78%
FTSE: 7539.31 +2.53%
S&P 500: 3195.60 +0.85%
DJIA: 28329.41 +0.69%
US 10-yr 1.868% +0.047
Bund 10-YR -0.294% UNCH
UK 10-YR: 0.795% +0.003
JPN 10-YR: -0.023% -0.007
Oil: 60.22 +0.25%
Gold: 1482.90 +0.11%
Bitcoin: 7076.29 -0.26%
Etherium: 140.67 -0.94%

Fresh Market Headlines & Economic Data:

Upcoming Potential Catalysts on the Forex Calendar for U.S. & Asia:

  • Bank of England Financial Stability report at 5:00 pm GMT
  • Bank of England Press conference at 5:30 pm GMT
  • New Zealand Consumer confidence at 9:00 pm GMT
  • U.S. Net Long-term Tic flows at 9:00 pm GMT
  • New Zealand Business confidence at 12:00 am GMT (Dec. 17)
  • Reserve Bank of Australia Meeting minutes & Home loans at 12:30 am GMT (Dec. 17)

What to Watch: USD/CAD

USD/CAD 1-Hour Forex Chart
USD/CAD 1-Hour Forex Chart

Global risk sentiment is on the upswing to start the week, likely on last week’s trade developments between the U.S. and China, as well as the the U.K. election results reducing Brexit uncertainty, and some positive data today in the form of flash business activity reads. We’re coupling this overall sentiment with a strong short-term trend in USD/CAD, as the scheduled catalysts for the next session or two look to have small odds of changing the mood.

On the one hour chart above of USD/CAD, we can see the Loonie rallying against the Greenback, likely on the above mentioned themes, as well continued positive economic updates from Canada, but now we’re seeing a bounce in the trend that could be a short-term opportunity to get in the trend at a better price.

If you agree with the current trend lower, look for a potential resistance / reversal patterns around current levels up to the 61% Fib retracement area (which also lines up with the strong area of interest around 1.3180) before considering a short position. The daily ATR is around 50 pips, so from there the potential return-on-risk is pretty favorable when shooting for the next major psychological level (1.3100) or even the October lows just above 1.3050.

For the bulls, if geopolitical news/risk sentiment turns negative (e.g., U.S.-China trade tensions, surprisingly weak economic data or central bank speak), bullish reversal patterns from 1.3100 – 1.3050 is likely to draw in buyers, not only looking to play the change in sentiment, but also some profit taking after the recent swing move lower from the 1.3300 handle since November.