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There are signs though that a pullback is due, with the five day MA flattening out. The MACD is also flattening out, although remains above the signal line. A pullback to 1.0845 (the 38.2% retracement of the 1.0609 to 1.0991 rally) for USD/CAD could be healthy, and given the MACD is still significantly above zero suggests pullbacks will be contained in a bullish trend.
If we go more short-term and look at the hourly chart (see below), this backs up the view that a pullback could be on the cards. Bear in mind I felt this would come last week and it didn’t materialise. There is good supply coming in around 1.0980 and the MACD has moved through the signal line, highlighting momentum is accelerating to the downside. You certainly can’t say this is a bearish picture at all, but again a move to support around 1.0830 to 1.0850 would be positive for USD bulls.
In terms of expectations, the market has a modest easing bias over the next twelve months, but inflation is going to be key. Looking at postioning and the recent COT (commitment of traders report) showed a 11.2% increase (up to last Tuesday) in CAD net shorts. However while the 67,345 net short contracts is clearly elevated, it is still well off the levels we saw in April 2013 (75,913 short contracts).