By IFCMarkets

Preparing for the publication of significant statistics

In this review, we suggest considering the personal composite instrument (PCI) “CAD vs. Currencies”. It reflects the price dynamics of the Canadian dollar against other world currencies. Is there a possibility for the CAD_Index price to decline?

The PCI decreases in case of the weakening of the Canadian dollar against other major world currencies. On Friday, the data on foreign trade for June and the labor market for July will come out in Canada. The negative foreign trade balance is expected to be maintained and the number of new jobs- reduced. Theoretically, negative data may contribute to the weakening of the Canadian dollar. Earlier, the Canadian dollar rose against the US dollar by 10% since early May, 2017 and by 4% in July. The main reason for this was investors’ expectations that the Bank of Canada will raise the interest rate for the first time in 7 years at its meeting on October 25, 2017. At the same time, the probability for this to happen already at the next meeting on September 6, is estimated quite low – at the level of 40%. It is possible that in this period there may be a correction of the Canadian dollar.

On the daily timeframe, CAD_Index: D1 has come out of the uptrend. The continuation of the downward correction is possible in case of the publication of weak economic data in Canada.

• The Parabolic indicator gives a bullish signal.
• The Bollinger bands have widened, which means higher volatility.
• The RSI indicator is above 50. It has formed a weak negative divergence.
• The MACD indicator gives a bearish signal.

The bullish momentum may develop in case CAD_Index drops below 0.807. This level may serve as an entry point. The initial stop loss may be placed above the last fractal high at 0.82. After opening the pending order, we shall move the stop to the next fractal high following the Bollinger and Parabolic signals. Thus, we are changing the potential profit/loss to the breakeven point. More risk-averse traders may switch to the 4-hour chart after the trade and place there a stop loss moving it in the direction of the trade. If the price meets the stop level at 0.82 without reaching the order at 0.807 we recommend cancelling the position: the market sustains internal changes that were not taken into account.

Summary of technical analysis

Market Analysis provided by IFCMarkets