A momentum move below 1.2968 eyed
The USDCAD fell sharply in last week's trading, falling below trend line support on the daily chart and tumbling below a number of swing levels at the 1.3000 area (see red circles in the daily chart below). The price fell below the 61.8% of the move up from the May 2016 low at 1.2968, but stalled at 1.2945. The 1.2968 level is also the low from January 31, 2017. Despite the break last week, the price has been waffling back and forth as "the market" digested the fall (and consolidated).
However, we are now seeing a sharper move lower after the Canada PMI data. The price is trading to a new low going back to September 9th. Staying below the 61.8% is now risk for traders. Sellers are taking more control.
Looking at the hourly chart, the 100 hour MA was able to catch up to the price today. When tested (see blue line in the chart below), the sellers came in and put a lid on it. That moving average is down to 1.3000, increasing that levels importance going forward. For shorts that too is a level to stay below now.
The bears are in control. The close risk is the 1.2968 area from the 61.8% and the January low. . Other risk comes in against the 100 hour MA at 1.3000 currently (also a swing area going back into 2016).
Targets include the 1.2831 area. Below that the swing low from August 19 at 1.2763 and the lows from June 2016 at 1.2665 are doable down the road. If the BOC continues its tightening rhetoric, the selling can continue.
PS The commitment of traders speculative position in the CAD last week came in short 49K vs 82K the prior week. This suggests that some shorts finally got out of their losing position. However, there remains some shorts who are still caught. That can lead to more liquidation which in turn, could help to keep the pressure on the USDCAD (higher CAD) as the shorts feel the squeeze.