Talking Points:
– Canadian Dollar Fails to Benefit From Better-than-Expected 2Q GDP Report.
– AUD/USD Struggles to Hold Range Even as RBA Remains on Hold.
– USDOLLAR Remains Capped by 78.6% Retracement- ISM Manufacturing Disappoints.
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USD/CAD
Chart – Created Using FXCM Marketscope 2.0
Even though Canada’s 2Q Gross Domestic Product (GDP) report beat market expectations, the loonie remains at risk of facing additional headwinds as the region enters a technical recession, and the long-term outlook for USD/CAD remains bullish amid the deviation in the policy outlook.
However, with the BoC widely expected to retain its current policy at the September 9 policy meeting, more of the same from Governor Stephen Poloz may trigger a near-term correction in USD/CAD especially as the Relative Strength Index (RSI) struggles to preserve the bullish momentum carried over from April.
DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-short USD/CAD since June 18, but the ratio continues to come off of recent extremes as it narrows to -1.63, with 38% of traders long.
AUD/USD
May see a resumption of the long-term bearish trend as AUD/USD struggles to retain the range carried over from the previous week even as the Reserve Bank of Australia (RBA) retains its current policy & continues to endorse a wait-and-see approach.
Close below near-term support around0.7090 (78.6% retracement) may spur a further decline in the exchange especially as the RSI dips into oversold territory.
Next downside region of interest comes in around 0.6950 (161.8% expansion).
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USDOLLAR(Ticker: USDollar):
Index
Last
High
Low
Daily Change (%)
Daily Range (% of ATR)
DJ-FXCM Dollar Index
12020.18
12037.58
11982.95
-0.07
86.82%
Chart – Created Using FXCM Marketscope 2.0
Despite the ongoing batch of mixed data prints coming out of the U.S. economy, will keep a close eye on 12,049 (78.6% retracement) for the Dow Jones-FXCM U.S. Dollar as the RSI breaks out of the bearish formation from July.
With the ISM Manufacturing survey’s employment component slowing for the second consecutive month, may see market expectations for a strong Non-Farm Payrolls (NFP) report diminish as the data continues to highlight the slack in the real economy.
Break & close above 12,049 (78.6% retracement) will bring up the next topside target at 12,082 (61.8% expansion).
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— Written by David Song, Currency Analyst
To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.
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Source: Daily fx