The downtrend in USD/CAD may be the play of the day with volatility likely to pop for the pair on fast approaching U.S. and Canadian data!
Intermarket Snapshot
| Equity Markets | Bond Yields | Commodities |
| DAX: 10719.27 -0.43% FTSE: 6800.95 -0.53% S&P500: 2533.05 +0.04% DJIA: 24468.99 +0.15% |
US 10-yr 2.645% -0.014 Bund 10-YR 0.213% +0.006 UK 10-YR: 1.251% -0.026 JPN 10-YR: -0.011% +0.023 |
Oil: 48.48 +1.08% Gold: 1292.80 +0.54% |
Fresh Market Headlines & Economic data:
- China has ‘good faith’ to fix trade issues as talks with U.S. resume
- May to pitch more Brexit ideas as she seeks EU help
- Britain’s May to hold parliamentary Brexit vote on January 15: BBC
- Goldman Sachs slashes 2019 oil price forecast amid oversupply concerns
Upcoming Potential Catalysts on the Forex Calendar:
- Canadian Ivey PMI at 3:00 pm GMT
- U.S. ISM Non-Manufacturing PMI at 3:00 pm GMT
What to Watch: USD/CAD Downtrend
FX volatility is pretty light to start the new trading week with most pairs trading within their daily ATRs. That could change for USD/CAD soon as we will get two economic data points that will likely get the market moving for the North American currencies.
Canada’s Ivey PMI and the U.S. ISM Non-Manufacturing PMI are economic leading indicators on business conditions, so we could see movement in both currencies, especially if there is a big difference between the numbers we’re about to see and expectations, like what we saw last week with the ISM manufacturing PMI report.
If we do see a pop in volatility, for you bears out there the trend is on your side at the moment with USD/CAD seeing strong downside momentum since the start of the year. Shorting around current levels should have a favorable risk-to-reward given the lack of any near term support, but for conservative traders, a bounce up to Friday’s low/close and this week’s open is also an option to get in at better prices.
For the bulls, that same area between 1.3380 – 1.3400 should be where you are considering going long if the market can break higher and sustain any upside momentum if these top tier events we’ll see supports a strong Dollar and weaker Loonie.
Fresh developments in the major themes driving the markets like the U.S.-China Trade situation, Brexit negotiation updates and monetary policy updates from major central banks are still live as potential catalysts, so keep your risk very low when trading short-term.