Daily December Canadian Dollar Pattern, Price & Time Analysis
The December Canadian Dollar is stabilizing after a week long decline. Investor concerns over possible debt contagion in Europe has trumped the impact of positive economic data in the U.S. for most of the week. Technical factors and week-ending profit taking are most likely the reasons for this morning’s turnaround. The developing move isn’t likely to lead to a change in trend, but could produce a near-term short-covering rally.
With the Canadian Dollar hovering around a five week low, traders looked for a silver-lining despite lingering sovereign debt turmoil in Europe and weakness in higher-yielding stocks and commodities. They may have found it in the news that foreigners bought a net $7.15 billion of Canadian securities in September. The area of interest for investors was federal government short-term debt.
While traders may be embracing this news as a positive development, it is after all, old news. The primary focus for traders at this time is Europe and the fear of contagion. With the European Central Bank fanning the contagion fan because of its split purchase of Italian and Spanish bonds, commodity-linked currencies such as the Canadian Dollar, Australian Dollar and New Zealand Dollar are all suffering big losses this week as investors continue to shed riskier assets.
Technically the main trend for the Canadian Dollar is down on the daily chart. This trend will not turn to up until the swing top at .9903 is broken. Additional resistance is being provided by a downtrending Gann angle at .9777.
Based on the main range of .9367 to 1.0097, the major retracement zone is .9732 to .9646. Currently the December Canadian Dollar is testing this range. Often after a prolonged move down in terms of price and time, a market turns around on profit-taking when this zone is tested. After testing uptrending Gann angle support at .9697 this morning, the technical bounce to the upside suggests the market may be forming a daily closing price reversal bottom.
If this pattern is formed, then traders should watch for the start of a possible 2 to 3 day rally equal to at least 50% of the last down move. Based on the short-term range of .9903 to .9699, traders should watch for a minimum retracement back to .9801.
