DailyFX Analysts Mixed The Canadian Dollar, Eying Greenback Volatility

Daily Forex Technicals | Written by DailyFX | Jul 31 08 18:27 GMT |

The expected carry through in US dollar volatility following today's GDP release and before tomorrow's NFPs is leading some DailyFX Analysts to the breakout potoential in USDCAD. Check out the Analysts picks below: Quantitative Currency Strategist - Antonio Sousa My picks: Long USD/CAD Expertise: Fundamentals, Volatility and Sentiment Average Time Frame of Trades: 1 week - 6 months Over the past two weeks the U.S. dollar has been rallying against the Canadian dollar on speculation the U.S. economy will be able to escape what once seemed inevitable, a technical recession. Indeed, I expect the U.S. dollar to gain more strength ahead of tomorrow’s release of Non-farm payrolls and I expect the U.S. Federal Reserve to be much more aggressive than the Banc of Canada in the second half of 2008. According to overnight index swaps, which measure interest rate expectations for the next twelve months, traders expect the Fed to be more hawkish than the BoC. While the BoC is expected to keep rates unchanged, the Fed is expected to increase rates by 78 bps over the next 12 months. My recommendation is to buy USD/CAD at the market with a stop in a daily close below parity for a 300 pips profit potential. Technical Currency Analyst - Jaime Saettle My picks: Stay Long USDCAD Expertise: Technical Average Time Frame of Trades: 1 month I am staying long the USDCAD in anticipation of the break above 1.0378 and expected test of 1.05 and possibly 1.08. Near term support is at 1.0174. I have thought about adding to this trade through other CAD crosses (long GBPCAD, EURCAD for example) but a longer term USD rally is probably underway although a short term corrective USD decline is underway now. Currency Analyst - John Kicklighter My picks: Watching for a potential EURCAD breakout Expertise: Combining Money Management with Fundamental and Technical Analysis Average Time Frame of Trades: 3 days - 1 week The Canadian economy has faltered once again. The country's May GDP reading unexpectedly slipped 0.2 percent - leading traders to cut back on speculation that a rate hike from the Bank of Canada is imminent. In fact, the outlook for the benchmark lending has actually dipped into negative territory (denoting a net outlook for a potential cut over the coming year). In comparision, the projections for the ECB are very similar - with a slight skew in interest rates suggesting a possible easing over the period. However, looking at the bigger picture, inflation is still far greater an issue in Europe, growth has yet to bauble like it has in Canada and the ECB has set no precedence for easing (where as Canadian policy makers have just recently come off of considerable rate cuts). Technically, EURCAD is in an ascending wedge that goes back to November. As of today, that formation is offering the market less than 200 points to trade in and that range is closing fast. Considering the dominate trend, the prominence of the rising trendline, 50-day and 100-day SMA as well as the 50% fib of the March 31st to May 29th swing low all around 1.5800/50; the probabilities are leaning towards an upside breakout. I will wait until spot clears 1.6125/50 with a close on the higher time frame (or perhaps even a market entry on a push through 1.6300). My stop will be wide to allow for a pull back before continuation. If momentum does not develop however (as this pair is already near record highs), I will step back and reaccess the trade. Currency Analyst - Terri Belkas My picks: Long USD/JPY Expertise: Fundamentals Combined With Technicals Average Time Frame of Trades: 1-3 Days While this morning's economic data (disappointing US Q2 GDP) will certainly not be a positive point for the US dollar and US equities, I think it may be creating a good buying opportunity for USD/JPY. I suspect the pair will drop a bit lower, with near-term support sitting at a rising trendline at 107.50 but more substantial support at the 38.2% fib of 103.76 - 108.26 at 106.60. The obvious risk here is 1) the lasting reaction of the USD throughout the day to this morning's data and 2) Friday's US non-farm payrolls. As a result, I think the best way to play this is to allow price to come to us and go forward from there. Currency Analyst - David Rodriguez My picks: Take profit on CAD/JPY short Expertise: System Trading Average Time Frame of Trades: 2-10 weeks My CADJPY short from last week has hit my first profit target and is well on its way to hitting its full profit target, but the pair's inability to break below important support suggests that we should tighten risk on the position. The pair has now stalled several times at the 61.8 percent Fibonacci retracement of 103.60-107.20, and as such, I'd like to move max risk on this position to just above intraday resistance at 106.00. In terms of a new trade, breakout traders may prefer to short a break of noteworthy support at the 104.85 mark, but it will be difficult to achieve attractive risk:reward levels on such a trade. Currency Analyst - Ilya Spivak My picks: Short AUDCAD Expertise: Macro Fundamentals, Classic Technical Analysis Average Time Frame of Trades: 1 week - 6 months Yesterday saw AUDCAD break below a trend line that has supported price action since late December of last year. The decline found an interim bottom at 0.9631, the 38.2% Fibonacci retracemenf of the 05/14-06/09 rally. Fresh fundamental data reveals the Australian economy in a dire state. Consumer demand fell sharply in June, with Retail Sales printing at a six-year low of -1.0%. If the recent collapse in crude prices continues, this may give RBA Governor Glenn Stevens room for a rate cut to support the economy at the next policy meeting in September. With the BOC still firmly on hold, this would begin to tilt interest rate expectations in favor of the Canadian dollar, supporting a trend change. Strategy: Short AUDCAD on a pull-up to 0.9708, the 23.6% Fib level. Initial target at 0.9501, the 61.8% Fib. Stop loss at 0.9809. Currency Analyst - John Rivera My picks: Long EURUSD Expertise: Fundamentals Combined With Technicals Average Time Frame of Trades: 3-6 Days I am bearish on the Loonie after the negative growth reading in May and the EURCAD pair looks like the best play as it has broke above 1.600 and may look to restest the March high of 1.6326 . with 1.6700 as the next level of resistance. Target 1.6350 DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. 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