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USDCAD Rebuffed by Long-Term 50% Retracement... Sees Key Employment Reports Next Week Print E-mail
Daily Forex Technicals | Written by Forex.com | Feb 01 14 05:14 GMT

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

 

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