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A Brief Look At USD/CAD

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A Brief Look At USD/CAD

Post by joanfx on Wed Sep 26, 2012 6:23 pm

Last week the currency pair moved steadily on the upside as the prices of commodities declined. On Monday we started slow, trading in a tight range in the early hours of the session. The 0.97 level acted as a support, curbing the bears’ efforts to push the USD/CAD lower, while the 25-period moving average acted as a resistance. Investors, trading range in binary options profited from this movement in close boundaries, but their strategy lost its validity when the bulls finally took control of the market and sent the Loonie lower against its U.S. counterpart. The move to the upside was largely due to a decline in the prices of commodities, but also in part due to the worse-than-expected foreign securities purchases number. Analysts were projecting the value of domestic stocks, bonds and money-market assets purchased by foreigners to have risen to 11.30B, but instead they increased to just 6.67B. The currency pair finished its Monday session around the highs after encountering with some resistance at its 50-period moving average. It was a good level for traders of binary options to put as the rally was clearly running out of steam. Tuesday was a very choppy day with most of the trading occurring around the 50-period moving average. Neither the bulls, nor the bears were able to take a firm grasp of the market and as a result traders of range in binary options were once again the big winners. A good rate to enter in the option was the 50-period moving average, which stood at 0.9739. On Wednesday the sell-off in the higher-yielding currencies, including the Canadian dollar, continued as commodities took another hit after the crude oil inventories rose sharply by 8.5M barrels. The USD/CAD steadily moved to the upside, but its advance remained somewhat limited as some investors chose to put their money in the Loonie, running from the yen. This move came in a response to Bank of Japan’s decision to extend its bond-buying program by 10 trillion yens. Thursday was a pretty good day for traders of binary call options on the USD/CAD. The currency pair shot up, pushing above its 100-period moving average for a brief moment. Towards the end of the session, however, the rally ran out of the steam and the bulls scattered, giving way to the bears, which dominated the market for the rest of the day. The decline was in part due to the strong resistance at the 100-period moving average and in part due to some profit taking occurring ahead of the release of the closely monitored CPI figures on the following day. On Friday, the core CPI figures came in line with expectations, but the CPI numbers disappointed, rising by a modest 0.2%. At the same time the wholesale sales on a month over month basis dropped by 0.6%, which was their lowest reading since January. Analysts were projecting a much more modest dip of 0.1%. To make the matters worse, the reading for July was revised downwards – from -0.1% to -0.3%. After the news hit the wires investors shed their holdings in the Loonie, but even with this selling the USD/CAD was unable to reach the highs it touched on Thursday, finishing at 0.9760.

This week the sell-off in the Canadian dollar continues as metal prices are extending their previous week’s declines. The USD/CAD is currently trading at 0.9807 after touching highs of 0.9815 earlier in the session. Traders, who want to profit from the movements in the currency pair should monitor closely the results from the reports that are scheduled to be released later in the week as they might have a significant impact over the direction of the USD/CAD. First we have the retail sales and the core retail sales, published on Tuesday, and later we have the GDP numbers, announced on Friday.

Technically speaking, support in the currency pair is provided by the 100-period moving average around 0.9779, while resistance stands at the highs we touched in early September around 0.99. Oscillators are all trending higher with the relative strength index at 67 and the stochastic approaching overbought territory, currently standing at 74. The MACD is moving above the key 0 level, issuing mixed signals, which might indicate that the USD/CAD is looking for a direction.

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