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To start the new week, we’re looking at USD/CAD as it retests a strong consolidation area after a downside break. Will the bears hop in again for potential short-term pips?

Intermarket Snapshot

Equity Markets Bond Yields Commodities & Crypto
DAX: 12725.62 +0.40%
FTSE: 6069.87 +0.62%
S&P 500: 3354.35 +0.09%
DJIA: 27685.75 +0.92%
US 10-YR: 0.557% -0.005
Bund 10-YR: -0.526% -0.019
UK 10-YR: 0.125% -0.015
JPN 10-YR: 0.007% -0.012
Oil: 42.01 +1.92%
Gold: 2053.90 +1.27%
Bitcoin: 11,922.54 +1.98%
Ethereum: 395.80 +1.65%

Fresh Market Headlines & Economic Data:

China imposes sanctions on U.S. lawmakers over Hong Kong

Oil climbs on positive China data, rising demand

The number of U.S. job openings increased to 5.9M on the last business day of June – U.S. Bureau of Labor Statistics

Fed’s Evans says another coronavirus aid package ‘incredibly important’

The Sentix overall index for the eurozone economy climbed by +4.8 to -13.4 points

French economic activity runs 7% below normal level in July – Bank of France

German firms expect public life to be restricted for a further 8.5 months – Ifo

UK shopper numbers rise after launch of state-funded dining scheme

One in three U.K. employers plans to cut jobs in this quarter

Swiss unemployment rate remained at 3.2% in July

New Zealand Business confidence deteriorated 10 points to -42.4%

China July consumer inflation picks up amid flood disruption

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

Fed Evans speech at 8:00 pm GMT
Japan Current Account, Bank Lending at 11:50 pm GMT
Australia Business confidence at 1:30 am GMT (Aug. 11)
Japan Eco Watchers survey at 5:00 am GMT (Aug. 11)

What to Watch: USD/CAD

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

On the one hour chart of USD/CAD above, we can see that the bears have once again held off the bulls at the 1.3400 handle today, which was an area of consolidation at the end of July. The news and data was pretty light today, so we’re guessing the improving economic data from Asia and Europe sparked a risk-on lean for traders, as well as speculation that the improving data may lead to rising oil demand/prices (which usually supports the Loonie).

We’ve also got uncertainty with the U.S.’ next stimulus package (Trump signs orders aimed at extending some pandemic relief after Congress fails to reach a deal; orders could face legal challenge) that could be weighing on the Greenback. So, are there more downside pips ahead for USD/CAD?

Well, with no major economic events ahead, it’s likely this sentiment could continue for the rest of the U.S. trading session. We do have a speech from Chicago Fed President Charles Evans coming later in the session, and bearish comments on the economy there could bring on more pressure on the Greenback.

For the bears out there, with resistance already formed and a spike lower on the session, the odds seem to be in your favor at the moment. And with a daily ATR of around 85 pips and a potential target around the previous swing low (around 1.3235), both the probability of success and potential short-term return-on-risk is in your favor if conditions remain the same. And the odds of success rise if we see positive news on the COVID-19 vaccine/therapy front or if the rising case counts decelerate.

For the bulls, we are testing the bottom of the July range, which could draw in technical buyers, but it’s probably a good idea to look at for catalysts given the today’s driving themes. If we see a risk-off catalyst (e.g., no chance of reopening stimulus talks, rising geopolitical tensions, etc.) then the bulls could have legs to move this pair back to the top of the range (around 1.3450). From current levels, a trade targeting that area with a daily ATR stop is an attractive short-term setup if we indeed do see a pickup in volatility.