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Will the #USDCAD price break higher or lower?
The clue may be in the retail sentiment data.
Watch the video to learn more…
https://youtu.be/gDiVtH-PoKY
Today, we’re taking a look at USD/CAD as there could be a potential breakout move.
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Daily timeframe
The price is currently trading between 126.30 and the lows at 1.2522.
Looking at the overall price action, there could be an argument for both buying and selling this move. If we look at the currency strength and weaknesses at the moment, the CA Dollar and the US Dollar are pretty much in line with each other.
So, the two currencies that used to be strong are starting to become very weak. That’s why we have this range going on.
When we have a range, we need additional information to make a call on whether to buy or sell. We need to look at seasonal patterns, commitment of trade reports, or even retail sentiment to identify which way the price could break to.
USD/CAD is trading in a tight range between the highs of 1.2630 and the lows of 1.2522. A range occurs when a currency pair is both strong or weak. When a market ranges, we need additional information such as seasonal analysis, commitment of trader reports, or retail sentiment to identify which direction the price will likely break to.
NZD/USD
A couple of days ago, we spoke about buying the NZD/USD because of the price direction according to retail sentiment.
We used a similar analysis for NZD/USD a couple of days ago, where we suggested that the price is more likely to break higher. Primarily, due to the USD seasonal weakness and the retail sentiment suggesting retail traders are heavily short. The price broke higher and is now approaching overall targets.
We talked about buying NZD/USD at 0.70340. That’s because even though the Kiwi and US Dollar were both weak currencies, the retail sentiment showed us that they were heavily selling around 0.70530-0.70720.
That could be a sign that the price could go the opposite way and break out to the upside. We can see that today. The market has rallied quite significantly.
Using that theory, can we look at another currency pair? Well, USD/CAD is also ranging.
USD/CAD
The retail sentiment is telling us that we should be bearish because 66% of retail traders are currently long.
It’s over the 50% mark, which is great. But, if we look at the changes in positions, they are adding in heavy long positions.
Retail traders are positioned long at the current level in USD/CAD’s retail sentiment. They also increased their long positions by 20% and decreased their short positions by -16% This tells us that the price would break the range to the downside.
Why did they add heavy long positions? Because the price is at the lows. They’re looking to buy that position.
If they are buying, they are usually wrong. There’s a strong open in the market but they are decreasing their short positions.
The breakout of the consolidation will likely go to the downside because they’re adding in heavy positions.
Now, if they’re adding heavy positions at 1.253.56, then their stop losses are going to be at least below this swing low 1.24920 then below this major low 1.23820.
I’m looking for a break out to the downside, similar to NZD/USD. We have a strong bearish candlestick. Can we get a break out and move to the downside? Potentially.
With the sentiment information, we can look for short opportunities. If the price breaks the lows, we could see a move down to the recent swing lows where retail stops will be.
So, that’s what I’m looking for on USD/CAD. Let’s see if the price breaks the downside.
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