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.
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Fresh Market Headlines & Economic Data:
- China’s factory, retail sectors shine as trade tensions thaw
- Oil prices hold near three-month highs on U.S.-China trade deal
- Empire State Manufacturing survey held steady at 3.5
- U.S. Business activity growth accelerates to five-month high at 52.2
- U.S. Builder confidence in the market for newly-built single-family homes increased five points to 76 in December: NAHB
- International transactions in securities generated a net inflow of funds in the Canadian economy of $9.3B in Oct.
- Canadian National home sales edge higher in November by +0.61%
- U.K. Private sector activity falls again, led by fastest drop in manufacturing output since July 2012
- Rightmove predicts that the price of property coming to market in Britain will rise by 2% in 2020
- UK Brexit laws to be put before parliament on Friday
- German Manufacturing continues to weigh on private sector output
- Eurozone malaise extends in December, ending worst quarter since 2013
- French private sector growth continues despite broad stagnation in manufacturing
- Australia’s Finance Minister: No Need for More Fiscal Stimulus
- New Zealand Services PMI falls to 53.3 in Nov from 55.3 previous; Manufacturing PMI falls to 53.0 from 54.9
- Japanese economy ends fourth quarter in stagnation: Flash Manufacturing PMI Dec. 48.8
- Swiss National Bank could cut rates more in a pinch -Jordan
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
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.