USD/CAD Charge Eyes September Excessive as RSI Pushes into Overbought Zone

Canadian Greenback Speaking Factors

USD/CAD seems to be on observe to check the September excessive (1.2896) as Federal Reserve Chairman Jerome Powell adopts a hawkish outlook, and latest developments within the Relative Power Index (RSI) point out an extra appreciation within the trade price because the oscillator climbs above 70 to push into overbought territory.

USD/CAD Charge Eyes September Excessive as RSI Pushes into Overbought Zone

USD/CAD trades close to the weekly excessive (1.2837) following the kneejerk response to the ISM Manufacturing survey, and the trade price could proceed to understand over the approaching days as indicators of a sturdy restoration places strain on the Federal Open Market Committee (FOMC) to implement a price hike sooner slightly than later.

Image of Atlanta Fed GDPNow model

In keeping with the Atlanta Fed, the “GDPNow mannequin estimate for actual GDP development (seasonally adjusted annual price) within the fourth quarter of 2021 is 9.7 % on December 1, up from 8.6 % on November 24,” and it stays to be seen if the FOMC will modify its exit technique for 2022 as Chairman Powell and Co. are slated to replace the Abstract of Financial Projections (SEP) at its subsequent rate of interest determination on December 15.

Till then, the Canadian Greenback could proceed to underperform towards its US counterpart because the Financial institution of Canada (BoC) insists that “the economic system continues to require appreciable financial coverage help” after concluding its quantitative easing (QE) program in October, however an extra appreciation in USD/CAD could result in a flip in retail sentiment just like the habits seen earlier this 12 months.

Image of IG Client Sentiment for USD/CAD rate

The IG Client Sentiment report exhibits 53.90% of merchants are at the moment net-long USD/CAD, with the ratio of merchants lengthy to brief standing at 1.17 to 1.

The variety of merchants net-long is 10.38% larger than yesterday and 17.88% decrease from final week, whereas the variety of merchants net-short is 4.84% decrease than yesterday and 9.11% larger from final week. The decline in net-long place comes as USD/CAD trades close to the weekly excessive (1.2837), whereas the rise in net-short curiosity has alleviated the crowding habits seen since late-September as 63.80% of merchants had been net-long the pair final week.

With that stated, USD/CAD could try to check the September excessive (1.2896) because the Relative Power Index (RSI) pushes into overbought territory, and the bullish worth motion within the trade price is prone to persist so long as the oscillator holds above 70.

USD/CAD Charge Day by day Chart

Image of USD/CAD rate daily chart

Supply: Trading View

  • Be mindful, USD/CAD cleared the January excessive (1.2881) in August as an inverse head-and-shoulders formation took form, however the trade price did not defend the July low (1.2303) in October because the Relative Strength Index (RSI) dipped under 30.
  • However, the restoration from the October low (1.2288) has triggered an overbought readings within the RSI, and USD/CAD could try to check the September excessive (1.2896) so long as the oscillator holds above 70.
  • Nonetheless want a detailed above the Fibonacci overlap round 1.2830 (38.2% retracement) to 1.2880 (61.8% enlargement) to maintain the topside ranges on the radar, with a break above the August excessive (1.2949) opening up the 1.2980 (61.8% retracement) to 1.3040 (50% enlargement) area.

— Written by David Music, Foreign money Strategist

Observe me on Twitter at @DavidJSong

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