USD/CAD Technical Outlook Post NFP & Canada Jobs Data

USD/CAD Technical Outlook

• USD/CAD has been stuck for weeks sitting on the 2017 low
• May squeeze higher, but could be a difficult trade from the long-side

USD/CAD Technical Outlook Post NFP & Canada Jobs Data

U.S. NFPs showed that 559k jobs were added in May versus the 650k forecasted, while Canada lost 68k jobs compared to the analyst estimate of -20k. So far USD/CAD is showing little reaction to the headlines. On to the techs…

Looking at the backdrop here, support via the 2017 low has been highly influential since the second week of May. Every attempt to take it out during the past week has been thwarted, but at the same time there has been little lift despite clear sponsorship at the long-term support level.

There is a slope running lower from June of last year that once acted as support, but has recently turned into an increasingly reliable line of resistance. A solid crossing of this line may help spark a rally, however; the anticipation is that it could be a difficult countertrend trade.

Given the depths from which USD/CAD is trading from and persistent downtrend since topping last year, a complacent crowd may quickly get caught off guard and lead to a sharp spike higher. This could make entries difficult to find unless willing to pay up into upward momentum.

Conversely, the rally could be sluggish as countertrend rallies often times are. Countertrend moves are often marked by choppy trade that brings in little momentum as the general tides work against.

On the downside, seeing momentum pick up below 12006 will have a significant swing-low created in 2015 into focus at 11919. Price is extended so it may make any kind of sudden flush lower a sort of capitulation type situation. In general, shorts have lost much of their appeal from a risk/reward perspective.

In the near-term, traders could use the developing range on the 4-hr chart as a guide for short-term trades. The range is fairly defined with max high at 12144 and max low set at 12006. But again, given the broader scope, the range may only prove worthy for a short period of time following a breakout.

USD/CAD Daily Chart

USD/CAD 4-hr Chart

USD/CAD Charts by TradingView

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---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX