USDCAD Rebuffed by Long-Term 50% Retracement... Sees Key Employment Reports Next Week
Shortly after the Canadian November GDP and US December Personal income & spending data was released this morning, USDCAD tested the long-term 50% retracement around 1.1230 and failed, falling over 130 pips over the next 4 hours, before finding an intraday bottom. That said, while weekly RSI is clearly in overbought territory it has yet to show signs of a top, although there is evidence RSI has begun to roll-over on a daily chart, as such this situation needs continued monitoring over the coming days.
Next week sees a plethora of key economic data/events:
- Monday - Canada Dec. Industrial Production, US Jan. ISM Manufacturing, US Dec. Construction Spending
- Tuesday - US Dec. Factory Orders
- Wednesday - Jan. ADP report, Canada Dec. Building Permits, US Jan. ISM Non-Manufacturing
- Thursday - US Weekly Jobless claims, US & Canada Dec. Trade Balance, Canada Jan. Ivey PMI
- Friday - US & Canada August Employment Reports
Chart Source: Forex Charts by eSignal
Our proprietary model, which takes into account USDCAD's 3-month at-the-money option volatility, the CRB Index and 5-year interest rate differentials between the United States & Canada. This produces an R2 of 0.8836 since the beginning of February 2013 and implies a “fair value” of 1.0930. Based on current levels this suggests USDCAD is overvalued by approximately 2.4 standard deviations.
As a result, while this in itself is not necessarily indicative of a pullback, it is something USDCAD bulls should take into consideration.
Source: Bloomberg, FOREX.com