Loonie approaching the point of no return – Canadian Dollar Analysis

The perceived wisdom regarding the Canadian Dollar’s correlation with the price of crude has been true this year up to a certain point. When crude rallies the Loonie doesn’t go up very much, but when crude falls the currency falls sharply.  To highlight this I have placed an overlay of the weekly Crude against and inverted quote of the Spot USDCAD. Note how when Crude (in black) fell in 2014/15 the Canadian Dollar fell in tandem.  When Crude rallied at the beginning of 2016, Canada did likewise, but since the middle of last year whilst crude has edged higher the Canadian Dollar has been drifting lower, thus breaking the normal correlation.

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Therefore it is necessary to see whether the Loonie can achieve a further structural breakdown against a broad range of currencies regardless of what Crude does.

We start with the Cad Futures which is quoted inverted to the Spot. The daily chart below shows that having been in a broad sideways pattern for many months, today it is attempting to break the final point of support within that pattern. Holding below here opens up the potential for a huge slide down to the monthly Blue line support at 0.6835.

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Range Relativity is a core study used to understand the multiple facets of time and what can be achieved within Time and Space from the Weekly prospective up to the Yearly.

This shows that we are close to the weekly downside support at 0.7367 but already below the monthly support. If we close below the weekly support by Friday, that would open up space to fall to the quarterly target at 0.7319 at least.

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Many major currencies have had there own individual news driven drivers in recent days. The Euro got a boost from France but in truth the buys in the Euro were flagged last week against many Pairs.

The EuroCad posted two buy signals in the recent past with Pops appearing close to the final support point, followed by a PowwerPlay signal that broke above the monthly blue line resistance. Yesterday saw it take out the final black line weekly resistance, which opens up Space to rally to the target at 1.5282.

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canadian dollar analysis

Range Relativity highlights the velocity of the move as we first broke out on a weekly basis, and having paused briefly at the monthly and quarterly confluence, surged once again to breach the brown Semi-Annual level. This opens up space to move to the annual target at 1.5027.

Note how back in February price held the Pink Quarterly support repeatedly, before breaking out above the weekly resistance shortly afterwards where it had space to rally quickly to the Blue monthly target.

canadian dollar analysis

The Pound got its own boost last week from the General Election news. This caused a strong push higher and as the chart shows for the Pound/Canada it caused a PowwerPlay breakout through final weekly resistance. There is now a huge Space to the the target way above at 1.9303. A move back below the breakout point at 1.7120 on a weekly basis would signal that move up was false. Note how January saw price hold the final monthly blue line support.

canadian dollar analysis

Range Relativity shows that we are currently above the the Annual target, which means only weekly and monthly resistances can form between now and the end of June.

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Next is Cad/Yen. The purest signal was back in December and then again at the end of last year as a multitude of patterns appeared at the finally monthly resistance. More recently we have broken weekly black line support which has opened up Space to the monthly support way down at 0.7483.

canadian dollar analysis

Range Relativity somewhat surprisingly shows that price still has to hit Quarterly to Yearly Targets.

canadian dollar analysis

The charts against the Aussie and Kiwi are the least interesting as price on both is somewhat in no mans land and with supports or resistances still some distance away.

canadian dollar analysis

canadian dollar analysis

In Conclusion many cross rates are in breakout mode with targets distant and the Canadian Dollar Futures is also threatening to breakout. However, there is one major caveat on the Spot US Dollar/ Canadian Dollar. In contrast to the Futures the Spot rate has one final major monthly resistance at 1.3600. The fact that it is a round number is also significant as there will be a large number of Barrier options trying to prevent price reaching that point. It therefore holds the key to whether a longer term Loonie breakdown can occur.

canadian dollar analysis

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Please note this is general advice from Trading Safely for all our clients and has been prepared without taking into account your personal objectives, financial situation or needs. If you do wish to consider acting on our information please contact a licensed financial advisor to discuss the appropriateness of this recommendation for your own personal financial circumstances. Please obtain any relevant product disclosure documents before deciding to invest. Trading derivatives, stocks and CFDs can lead to losses greater than your deposit.

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