USD/CAD Outlook – Daily Price Chart Hints at a Reversal, All Eyes on The Fed Minutes

Canadian Dollar Price (USD/CAD), News, and Analysis:

• Long-term downtrend stalls ahead of FOMC.
• Dragonfly Doji and IGCS suggest a possible move higher.

The multi-month USD/CAD sell-off has come to a halt as market participants wait to hear details of the last FOMC decision later today. Traders will parse the minutes for commentary on the two big market issues, inflation and jobs. Any suggestion, even a hint, that the Fed are concerned that inflation may not be as ‘transitory’ as first thought would push both US Treasury yields and the greenback higher. A further ‘wait and see’ approach would keep downward pressure on the US dollar to a more limited extent. The UST 10-year currently trades with a yield of 1.66%, just above the middle of the recent 1.50% – 1.75% range.

A look at the daily chart shows ongoing weakness in USD/CAD with the pair currently stalling just above the psychological 1.2000 level. A closer look at the chart shows a dragonfly doji printed yesterday, a potential bullish reversal indicator. This set-up needs to be confirmed by a positive candlestick today to give it more credibility. Yesterday’s low at 1.2014 broke below the September 2017 spike low and saw USD/CAD touch levels last seen in May 2015. A bullish tailwind could see the pair touch 1.2200 in the short term.

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USD/CAD Daily Price Chart (October 2020 – May 19, 2021)

IG Retail trader data show79.22% of traders are net-long with the ratio of traders long to short at 3.81 to 1.The number of traders net-long is 0.29% higher than yesterday and 0.29% lower from last week, while the number of traders net-short is 1.70% higher than yesterday and 22.11% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USD/CAD prices may continue to fall.Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current USD/CAD price trend may soon reverse higher despite the fact traders remain net-long.

What is your view on USD/CAD – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.