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Forex Indices: Technicals Favour CAD Longs

Ahead of Biden's Presidential inauguration in the US and with Martin Luther King Jr. public holiday, the Forex market went through a day of rather suppressed volatility. These dynamics were particularly true in the heaviest currencies by order of volume transacted. I am referring to the US Dollar, the Euro and the Japanese Yen.

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Opportunities in the Forex indices (video below)

To see an expanded version, right-click and select ‘open link in new tab’. The indices show the performance of a currency vs a G8 Forex basket. Indicators are available to use these measures via Tradingview and MT4.

 

Ahead of Biden’s Presidential inauguration in the US and with Martin Luther King Jr. public holiday, the Forex market went through a day of rather suppressed volatility. These dynamics were particularly true in the heaviest currencies by order of volume transacted. I am referring to the US Dollar, the Euro and the Japanese Yen. In currencies such as the British Pound of the Canadian Dollar, solid buying was observed, including a long signal to speculate in further upside in the latter. For a full-fledged analysis of the market, keep reading below…

In my video analysis below I use concepts taught in the brand new Academy website such as momentum, volatility measures and market structures to come up with the daily outlook in the currency market.

EUR INDEX – NEUTRAL TO BEARISH

A period of consolidation at a key technical crossroads has ensued following the sharp sell-off experienced last week. This area coincides with the 100% projection target away from the last observed bracketed area and the lowest point from November last year. The concentration of volume around the 100% measured move via the POC outlines the interest by market makers to slow down the ongoing depreciation of the single currency. However, attempts to sustain the buying waves off the lows have proven ephemeral with the Control Line (13ema) capping the upside.

GBP INDEX – NEUTRAL TO BULLISH

The Sterling has regained the upside with impetus. A close above the purple rectangle above the current price would seal the downside head-fake move. If this occurs, I am suspecting follow through continuation in the British currency to the tune of about 0,20% towards the previous swing high ahead of a rally extension to its 2021 peak for an additional 0.15% gains. However, this bullish premise is still premature and won’t be vindicated until there is a resolution with a close above the aforementioned purple rectangle.

USD INDEX – NEUTRAL

The world’s reserve currency has paused its rally at the highest point in 2021. The velocity of the move away from the previous pocket of demand (highlighted in a purple rectangle) warranted profit-taking judging by the behaviour of price action which saw a gradual tapering in the size of each successive candle as the overhead resistance got approached. I remain neutral to bullish in this market owing it to the location we trade at even if we are nowhere near a trigger signal to take new positions in this market.

CAD INDEX  – BULLISH

The CAD exhibits bullish tendencies that I’d anticipate can continue. The market looks ripe to expand its 2021 gains on the back of a crossing of price back above the Control Line with most of the proprietary metrics giving us the blessings to speculate on further follow-through this Tuesday. There are no noticeable resistance areas to account for until the supply candle originated on Jan 15th through the European session (circa 0.2% away). This results in a relatively clear path to eat up nearby supply and exploit this voidness in liquidity.

JPY INDEX – NEUTRAL

The Japanese Yen looks overstretched by any measures. This is typically the worst time to speculate in long exposure unless the interest is hedging, scalping the market, etc. The market has, not coincidentally, stalled at the 100% projection target from what constituted a well-defined broad bracketed area. If the risk-on dynamics return, this is a more than reasonable location to start unwinding JPY longs in what I suspect could be a move back to re-visit the control line (13-ema). Alternatively, a break and close through the 100% proj target allows an extra run of ~0.2%.

AUD INDEX – NEUTRAL TO BULLISH

The short-term trend in the Aussie has been bearish but once stepping out to see the big picture, the current correction is far from compromising the overall bullish structure. In fact, the Aussie has reached an area of support in the chart where I’d expect selling to abate for a potential retest back towards the control line. The peak printed on Dec 31st that was convincingly broken a week after is now being retested which is what leads me to believe of the substantial risks that exist to see renewed buy-side interest in the currency.

NZD INDEX – BEARISH

The New Zealand Dollar remains unloved as buyers continue to be far outweighed by the selling wave hitting this market. As a matter of fact, the sell-side pressure has been so strong that even the 100% measured move away from the previous bracketed area has now been cleared. That said, this market is grossly oversold and proof of that is the intersection of price with the lower bollinger band alongside a 2-times ADR deviation away from the central ‘mean/control’ line. I remain bearish but it’s no time to enter positions at this stage in the bearish phase.

CHF INDEX – BEARISH

I can’t help but anticipate renewed weakness in the Swiss Franc following two consecutive failed attempts to break through a major resistance area. A re-take back below the control line would result in further technical evidence of a potential transition back down to retest the origins of the demand candle from Jan 15th through the European session. Overall, the market is in a consolidation pattern with significant risks of auctioning lower from the top-side to the bottom-side of its currently established range.

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About the author

Ivan Delgado

Ivan Delgado is a decade-long Forex Trader. Feel free to follow Ivan on Youtube. Join thousands of traders who follow Ivan's insights to increase their profitability rate by learning the ins and outs of how to read and trade financial markets. Ivan has you covered with in-depth technical market analysis to help you turn the corner.