USD/CAD RATE TRACKS WEEKLY RANGE AHEAD OF CANADA EMPLOYMENT REPORT
USD/CAD appears to be stuck in a narrow range after testing the 50-Day SMA (1.2790) for the first time since November, and it remains to be seen if the rebound from the January low (1.2589) will turn out to be an fatigue from the broader trend rather than a change in market behavior as crucial topics remain in place, and it remains to be seen if the current change in retail position will highlight a similar lively as the crowding behaviour from 2020 resurfaces.
Looking ahead, Canada's Employment will keep USD/CAD afloat as the economy is expected to shed 47.5K jobs in January after losing 52.7K jobs that the month prior, while the unemployment rate has been projected to increased to 8.9percent from 8.8% in December. Signs of a protracted recovery may create headwinds for the Canadian Dollar because it puts pressure on the Bank of Canada (BoC) to further support the market, along with the central bank could strike a dovish forward advice in its next meeting on March 10 as Governor Tiff Macklem and Co. remain"committed to providing the appropriate degree of fiscal policy stimulus to encourage the restoration and get the inflation goal."
Until then, key marketplace topics may continue to influence USD/CAD since the US Dollar broadly reflects an inverse relationship with investor confidence, and it seems as though the tilt in retail sentiment will also persist as dealers are net-long the pair as May 2020.
The IG Client Sentiment report shows 70.86% of dealers are still net-long USD/CAD, with the proportion of traders extended to brief standing at 2.43 to 1. The number of dealers net-long is 16.99% higher than yesterday and 12.58% higher from a week, while the number of dealers net-short is 15.60% lower compared to yesterday and 30.17% reduced from last week.
The decline in net-short position might be a purpose of profit-taking behaviour as USD/CADreverses before the weekly reduced (1.2761), while the increase in net-long interest has fueled the crowding behaviour carried over from last year since 52.12% of dealers were net-long the pair last week.
That said, it remains to be seen if the rally from the January low (1.2589) will prove to be an fatigue in the wider trend as opposed to a change in USD/CAD behavior as crucial marketplace themes stay in place, but the Relative Strength Indicator (RSI) continues to indicate a bigger correction in the market rate as it tracks the up trend established earlier this year.
USD/CAD RATE DAILY CHART
Remember, USD/CAD eliminated the January 2020 low (1.2957) following the US election, with the exchange rate trading to fresh annual highs in November and December since the Relative Strength Index (RSI) established a downward trend during precisely the exact same period.
USD/CAD started off 2021 by following last year's reduced (1.2688) even though the RSI broke out of the bearish formation, with lack of momentum to hold above the 1.2770 (38.2% expansion) area pushing the exchange rate temporarily below the Fibonacci stride around 1.2620 (50% retracement) into 1.2650 (78.6% growth ).
However, USD/CAD broke out of the opening scope for January after the string of unsuccessful attempt to close below the 1.2620 (50% retracement) into 1.2650 (78.6% growth ) region, together with all the RSI diverging with cost as it demonstrated an upward tendency.
USD/CAD is apparently stuck in a narrow range since it tests the 50-Day SMA (1.2790) for the first time since November, however absence of momentum to push below the 1.2770 (38.2% growth ) area may send the exchange rate towards the 1.2880 (61.8% expansion) area.
Desire a break/close above 1.2880 (61.8% expansion) to deliver the 1.2980 (61.8% retracement) place on the radar, with another area of interest coming in around 1.3030 (50% growth ) to 1.3040 (50% expansion) followed by the 1.3200 (38.2% expansion) handle.
