Forex Market Analysis - USD to CAD 27th August 2009

Forex Technical Analysis

Yesterday’s wide spread up bar on the usd to cad daily candle chart merely served to emphasise that the bullish engulfing candle of Tuesday was more than a simple short squeeze and therefore a move we need to consider with some degree of caution particularly for for those of you with open short positions. The high of the day closed well above both the 9 and 14 day moving averages in a move very similar to that of earlier in the month. Indeed the pattern now forming could be considered a double bottom, and therefore a reversal we need to analyse carefully, with the key issues being the 40 day moving average and the 1.11 price handle. The first of these is now on the horizon and naturally and break and hold above this key technical indicator would suggest that the reversal has some momentum. Secondly a breach of the 1.100 price level would again suggest that the move is likely to be sustained and is not simply the market taking a breather after the recent long decline, and with market volumes likely to return to normal following US Labour Day next month, this could be a signal that we are about to see a change in sentiment for the beleaguered  US dollar and therefore a reversal in the recent downwards trend.

Fundamental Forex Analysis

With no Canadian news, the main fundamental news on the economic calendar today for the usd to cad was all about the US economy and in particular the Preliminary GDP figures which came in better than expected providing a boost to the US dollar, and a strong move higher for the USD to CAD following a fall earlier in the trading session. The unemployment figures were less welcome coming in worse than expected at 570,000 against a forecast of 562,000, but on balance the recession seems to be coming to the end of the current cycle and we may now be seeing the start of the long slow recovery process long awaited by the markets in general.

You can keep up to date with all the latest fundamental news on the economic calendar, latest currency  news and live currency charts by simply following the links.  I have also included details on an excellent ECN broker.

Daily Forex Chart Analysis - USD to CAD 26th August 2009

Forex Technical Analysis

As outlined in yesterday’s forex technical analysis for the usd to cad pair, we were expecting a small bounce, and this duly arrived as a relatively wide spread up bar which closed the session with a flat top to the candle, and just below the 9 and 14 day moving averages. Whilst the short squeeze has begun, the reversal may be somewhat limited as prices will need to breach all three moving averages along with some deep pockets of resistance in the 1.10 to 1.16 price band, and whilts yesterday’s candle was a bullish engulfing signal, we need to see whether this particular move has any momentum or is simply a short term market correction before moving lower once again. Much of this will of course depend on the US dollar index, which is still looking extremely weak, and likely to collapse lower at any point. My trading suggestion once again for today is to look for small long positions as the squeeze higher continues, and over the coming days wait for any signals that the market is weakening again and looking to turn lower once again.

Fundamental Forex Analysis

The only item of fundamental news in Canada today is the Corporate Profits data, an odd data set which forecasts the profits earned by large corporations in the quarter, and therefore provides an insight into the broader economy. The figure released earlier was -6.4%, an improvement in last quarter’s data at -11.8%. All the other items of fundamental forex analysis are in the US, and of particular relevance this afternoon are the oil inventory numbers due shortly which whilst released in the US, have a greater impact on the Canadian dollar, and I have covered all of these in more detail on the euro vs dollar site.

You can keep up to date with all the latest fundamental news on the economic calendar, latest currency  news and live currency charts by simply following the links.  I have also included details on an excellent ECN broker.