Accelerating economic recovery is bullish for Canadian dollar
Canadian employment rose more than expected in May and central bank policy makers’ recent hawkish comments surprised investors. Will the Canadian dollar continue strengthening?
On the daily timeframe USDCAD: D1 has been trading with a negative bias on the daily timeframe since it hit a fifteen-month high in the beginning of May. The price is below the 50-day and 200-day moving averages MA(50) and MA(200), both on decline after levelling off.
- The Donchian channel gives a bearish signal: it is tilted downward.
- The Parabolic indicator ghas formed a sell signal.
- The MACD indicator gives a bearish signal.
- The stochastic oscillator has breached into the oversold zone which is a bullish signal.
We expect the bearish momentum will continue after the price closes below the lower bound of the Donchian channel at 1.3146. It can be used as an entry point for a pending order to sell. The stop loss can be placed above the last fractal high at 1.3346. After placing the pending order the stop loss is to be moved to the next fractal high following Parabolic signals. Thus, we are changing the profit/loss ratio to the breakeven point. If the price meets the stop loss level (1.3346) without reaching the order (1.3146), we recommend cancelling the position: the market sustains internal changes which were not taken into account.
Summary of technical analysis:
| Position | Sell |
| Sell stop | Below 1.3146 |
| Stop loss | Above 1.3346 |