Shine, Loonie, shine!

We all have habits. We usually wake every up day and do the same stuff. Some of the habits are good and useful, some of them are not. Anyway, you can easily build a portrait of a person, by knowing his/her habits. I have a habit of planning my trading week and day. First thing that I usually do before planning is looking at the economic calendar. It’s showing me ideas about the trading plan.

I see two important blocks of economic data scheduled for today: GDP and Philly Fed from U.S. and Employment, Retail Sales and Inflation figures from Canada. Now try to guess, what is the main currency pair I’m going to trade on today? - Exactly, it’s USDCAD. First part of the equation is weak. I do not expect any significant support from the third reading of GDP report from U.S., even if they revise it up to 3.4% in Q3. It would not have any impact on Fed’s point of view, while a potential down revision will add weakness to the greenback. Philly Fed Manufacturing report has low expectations and it does not have a big impact traditionally.

But look, what was happening on Canadian data in 2017? Surprisingly fast economy expansion, stronger-than-expected growth in consumption and production, inflation pressures and low unemployment forced Bank of Canada to tighten more rapidly, than the markets expected. Two fresh examples are illustrated on the USDCAD chart below: strong reports on December, 1st and BoC Gov Poloz speech on December, 14th. One more supportive factor for the loonie is the uptrend in crude oil prices. Once the WTI Crude Oil price will break the psychological level of $60 per barrel, it will make additional profits for the Canadian economy, dependent on oil exports.

Technical picture on the H4 chart below is mixed. An obvious horizontal resistance line is exactly at 1.2900 level. Yes, there are some attempts to break it, but all of them are failed, leaving just shadows on H4 candles. However, RSI oscillator is in bearish zone, below 50% level. Two nearest supports are SMA89 and SMA144 at 1.2816 and 1.2796 respectively. In case if the prices will break them clearly, we could see a further slide of USDCAD down to 1.2700/50 range. I would not be surprised if we’d see a test of 1.2650 support level as soon as this week, the same level has been tested on December, 1st after strong economic reports.

I plan to short USDCAD 5 minutes before the reports scheduled to release at 01:30 PM GMT. Of course, all of these technical suggestions will not work in case of weaker-than-expected reports today. And I will reverse immediately.

Two more assets to watch in the scope of difersification are GBPCAD and CADJPY. I mean a possible situation, when USD will surge suddenly, and will lift the USDCAD pair. In this case pound and yen will be weakest opponents for the greenback, I suppose. And the direction of the cross-rates will depend on the difference in volatility and speed of movement. Technicals are shown below.