Canadian Dollar Price Outlook:
- USD/CAD mounted a large rally early this week, but still remains within its recent range
- NZD/CAD appears to be in the early stages of a break out, a possibility we identified last week
- Will a continuation in risk appetite fuel further NZD/CAD gains? Or will CAD employment data stall the ascent?
Canadian Dollar Forecast: USD/CAD Languishes, NZD/CAD Breaks Out
The Canadian Dollar is in the midst of an important week from a fundamental perspective with looming employment data on the horizon. Due Thursday, the data could make or break the Canadian Dollar’s status which has become varied across a number of crosses. In the case of USD/CAD, important event risk could serve to finally spark a determined move in either direction after the pair has languished about since the beginning of July.
USD/CAD Price Chart: 4 - Hour Time Frame (April 2020 – July 2020)
Unsurprisingly, USD/CAD has seen relatively little progress for the month as the 200-period moving average and Fibonacci level near 1.36 look to influence price over the coming days. Already, the level has shown some ability to stall gains. As a result, the longer-term downtrend has remained intact.
| Change in | Longs | Shorts | OI |
| Daily | -23% | 18% | 2% |
| Weekly | -16% | 8% | 0% |
Since progress has been minimal, a break above the late June highs or beneath the mid-June swing low would constitute as a meaningful price development at this stage. In the meantime, USD/CAD will likely await fundamental catalysts as it grasps for a defined trend in the shorter-term.
NZD/CAD Forecast
Conversely, NZD/CAD has initiated what appears to be a bullish break higher, a possibility we highlighted just last week. The attempt higher began in earnest after resistance around the 0.88 mark was surpassed which allowed the pair to quickly progress higher until encountering a Fibonacci level at 0.8916 – a line which may act as resistance. With gains established, NZD/CAD will look to the upcoming Canadian jobs report to fuel a continuation higher.
NZD/CAD Price Chart: 4 – Hour Time Frame (May 2020 – July 2020)
With that in mind, a reversal lower would have to negotiate possible support at the 0.88 level, an ascending trendline projection nearby and a flurry of technical levels within reach of 0.87. Either way, recent price action may suggest the New Zealand Dollar is in the midst of a larger rally against the Canadian Dollar while the CAD remains lackluster in other pairs like USD/CAD.
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Thus, traders looking to capitalize on the upcoming influence of the Canadian jobs report might consider NZD/CAD as an attractive opportunity regardless of direction. For further updates and analysis, follow @PeterHanksFX on Twitter for updates.
--Written by Peter Hanks, Analyst for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX
