Chart of The Day USDCAD

USDCAD Probable Price Path & Potential Reversal Zone

USD: US stocks retreated from record highs, spurred by sell down in tech stocks after Twitter and Facebook moved to ban Trump permanently (in Facebook’s case, indefinitely) while Amazon Web Service, Google and Apple pulled support for the right-wing social media app Parler. This renewed long-standing anxiety that Democrats–controlled Congress would toughen regulations on big tech, to rein in on its massive power to dictate social media; in fact German Chancellor called Twitter’s removal of Trump’s account “problematic”. Traders largely ignored the House’s vote on a resolution seeking Vice President Mike Pence to invoke the 25th Amendment of the US Constitution to remove President Trump from office. Democrats would proceed to impeach Donald Trump for the second time should Pence fail to act. The Dow Jones slipped 0.3%, the S&P500 fell 0.7% and tech-focus NASDAQ was down more sharply by 1.3%. Selloff in treasuries extended into this week, pushing overall yields higher; 10Y UST yield went up another 3bps to 1.15% ahead of Wednesday’s auction of $38b 10Y notes. Gold futures gained 0.8% to $1850.80/oz as the dollar strengthened for the fourth consecutive session. Brent crude snapped a four-day winning streak, shedding 0.6% to $55.66/barrel on Monday.

CAD: Oil's ability to hold up and the stronger Canada business outlook indicator for Q4 helped to mitigate setbacks in the Canadian Dollar on Monday that had come from broad based US Dollar demand on a downturn in sentiment. With little on the domestic data front to move markets this week, Friday’s Existing Home Sales to contend with. External drivers,the dollar, risk appetite, commodities,will shape CAD trends for now. Speculative sentiment finally responded to the steady improvement in the CAD in recent months in late December and while bullish sentiment remains intact, net CAD longs were trimmed a slight USD53mn over the New Year period as gross CAD longs were pared back.

From a technical and trading perspective, the USDCAD along with the broader USD complex appears to be entering a corrective phase, the first test of the monthly pivot from below encouraged profit taking on the first leg off the early January lows. As 1.27, 1.2680 now act as as support counter trend traders will seek to re-engage bullish exposure if sufficient demand is demonstrated in this area targeting a grind higher to initially target 1.2850 enroute to an ideal 1.2950 test.

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