By IFCMarkets
Canadian dollar shows a weakening against the US dollar amid falling oil prices and good data on the US labor market for March. Oil is cheaper after the statement of Saudi Arabia that it would agree to “freeze” production only if other major producing countries, including Iran, would agree to do the same. The market participants are skeptical that OPEC and independent oil exporters to agree on the stabilization of production at a joint meeting on April 17th. Will Canadian dollar continue weakening? In USDCAD chart it looks like the growth. In general, it is expected that the US will tighten monetary policy, and Canada, on the contrary, to soften it.
Hydrocarbons are more than a quarter of Canadian exports, while the share of raw materials in general a little more than a half. In March 22 the new Canadian government formed by the Liberal Party increased the budget deficit for 2016/17 financial year to $29.4 billion. This is almost 3 times higher than the deficit at the Conservative government. Recall that a change of governing party in Canada has occurred in the past year. The budget deficit funds will be used to support economic growth in the face of low oil prices. Canada’s Finance Minister Bill Morneau said that investments are more efficient than a rate cut. Now most investors expect the Bank of Canada will keep rates at the current level of 0.5% at the next meeting on April 13th. In 2015, they reduced it twice. On Thursday, 31 March, Canada January GDP data was published. Its growth has far exceeded forecasts and was 0.6% compared with December. This has strengthened the opinion of investors, that discount rate will not change. On Friday, the Canadian Manufacturing PMI was published, which also came positive. Nevertheless USDCAD still showed easing as the US index of industrial activity (ISM Manufacturing) grew even more than Canadian.
On the daily time frame, USDCAD: D1 is in a downtrend. On Thursday, it updated semi-annual bottom, and already on Friday in the 2 nd time broke the downtrend line resistance. MACD indicator has formed a buy signal, and Parabolic turned up. The RSI is below 50. He formed the divergence to increasing. Bollinger Bands widened slightly, which shows medium volatility. We do not exclude a bullish movement, if the Canadian dollar quotations exceed last upper fractal, 1st Fibonacci level and the signal Parabolic: 1,33. This level can be used as an entry point. The most cautious investors can wait for the breakdown of the 200-day moving average line. The initial restriction of possible risk below the last lower fractal and six-month low: 1.285. After the opening of a pending order, move the stop signal after Bollinger and Parabolic to the next fractal low. Thus, we are changing the potential ratio of profit/loss in our favor. Most cautious traders after opening a deal can go to a four-hour chart and set the stop-loss following the direction of a price. If the price overcomes the stop level (1,285), without activating the order (1.33), it is recommended to remove the position: the market internal changes occur that were not taken into account.
| Позиция | Покупка |
| Buy stop | выше 1,33 |
| Stop loss | ниже 1,285 |
Market Analysis provided by IFCMarkets