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USD/CAD Bears to Face NFP / Canada Employment

USD/CAD Bears to Face NFP / Canada Employment

2018-01-04 16:43:00
Michael Boutros, Strategist
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USD/CAD Weekly Chart

USD/CAD Price Chart - Weekly Timeframe

Technical Outlook: In last month’s USD/CAD Weekly Technical Perspective we noted that, “50% retracement of the 2017 range- note that this level converges on the downslope resistance and has continued to govern the highs since late-October. Heading into the close of the year the focus is on a break of the 1.2575-1.2927 range to offer guidance (downside break favored).

An outside weekly-reversal candle off 1.2927 in mid-December shifted the focus to slope support with a break lower last week keeping the broader focus lower in USDCAD (note that December also marked and outside monthly-reversal candle- bearish). That said, a weekly close below the long-term 200-week moving average would be needed to keep the immediate decline viable.

USD/CAD Daily Chart

USD/CAD Price Chart - Daily Timeframe

The daily chart highlights near-term confluence resistance at 1.2598 where the October opening-range high converges on the 100-day moving average. This level is backed by the 2012 trendline (red) with our broader bearish invalidation level steady at the slope extending off the 2017 highs (purple) currently ~1.2750s.

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USD/CAD 240min Chart

USD/CAD Price Chart - 240min Timeframe

Notes: A closer look at price action sees the pair trading within the confines of a descending pitchfork formation extending off the late-October high. Interim support targets rest at 1.2485/89 backed by the lower median-line parallel (currently ~1.2440s) and the triple-top measured objective / 61.8% extension at 1.2415/23- Note that this threshold converges on the lower parallel heading into next week.

Bottom line: Near-term bullish divergence into these lows highlights the threat of a recovery here but ultimately we’ll favor fading strength in the pair while below the median-line / 1.2660. Keep in mind that tomorrow represents considerable event risk for the pair with the simultaneous release of the U.S. Non-Farm Payroll report (NFP) and Canada employment figures likely to fuel added volatility in the USD & CAD crosses.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis mini-series

USD/CAD IG Client Sentiment
  • A summary of IG Client Sentimentshows traders are net-long USDCAD- the ratio stands at +2.11 (67.8% of traders are long) – bearish reading
  • Retail has remained net-long since Dec 21; price has moved 2.7% lower since then
  • Long positions are 12.3% higher than yesterday and 26.0% higher from last week
  • Short positions are 1.8% lower than yesterday and 9.3% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USDCAD prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger USDCAD-bearish contrarian trading bias.

See how shifts in USD/CAD retail positioning are impacting trend- Click here to learn more about sentiment!

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Relevant Data Releases

USDCAD Economic Calendar

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Other Setups in Play

- Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex or contact him at mboutros@dailyfx.com

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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