Chart Of The Day: Make Or Break For USD/CAD
Fawad Razaqzada | Feb 05, 2021 09:32AM ET
This article was written exclusively for Investing.com
This week’s mostly stronger US macro data has raised expectations that the nonfarm jobs report could beat expectations today. As we will also have the Canadian employment report released at the same time as the US nonfarm payrolls, the USD/CAD is an interesting FX pair to watch as it could set the scene for the next several trading days.
The US dollar has been on the ascendancy since the turn of the year, despite the ongoing “risk-on” and “reflationary” trades. In these conditions, you would think the more risk-sensitive Canadian dollar would perform better, given that equities and especially crude oil prices have been rallying, while safe-haven assets have been undermined. Yet, the USD/CAD has been edging higher, along with most other dollar pairs such as the USD/EUR and USD/JPY.
But can today’s North American jobs reports help to put that right, or are we going to see a complete trend reversal for the Loonie?
Well, so far, the USD/CAD’s revival can best be described as a countertrend move, for rates have not formed a major higher high yet. Indeed, at the time of writing, the USD/CAD was struggling to break its bearish trend line that has been in place since this North American currency pair topped back in March last year:
It is important that the bears now manage to defend the above trend line for price to maintain its bearish bias and attract fresh technical selling below it. However, a break above the trend line has the potential to lead to a 100-pip rally towards the key 1.2950 resistance level, which was a significant support in the past.
So, it is possible we may see a temporary break above the trend line and some further technical buying. But insofar as a complete trend reversal, that will be dependent on what happens at 1.2950 should price get there. A clean break above 1.2950 would form the first higher high, and as such end the short-term bearish bias.
But until and unless that happens, I would still be looking for bearish rather than bullish setups on this pair and bullish setups on other CAD crosses such as the CAD/JPY etc. The trend is your friend as the saying goes (…until that friend stabs you in the back). Happy Friday.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.