The USD/CAD pair broke down during the course of the day on Thursday, dipping all the way down to roughly the 1.36 handle. Because of this, we look very negative at one point but by the end of the day we turned back around to form a hammer. This makes a lot of sense though, because we get the Nonfarm Payroll Numbers coming out of America today, but we also get Employment Numbers coming out of Canada as well. So this means that this pair could be the place to be during the session today.
If we can break above the hammer from the session on Thursday, that’s a classic buy signal. At that point I would anticipate that this market would probably try to go back to the 1.40 level. Also, you have to pay attention to the crude oil markets as they are a main driver of the Canadian dollar as well. Those markets fall, this pair will rise and vice versa.
At this point in time, it is hard to tell what’s going to happen next because of the unknown quantities involved in the employment numbers, but it certainly seems as if we have pullback enough to start to see buyers of dips their toes back into the market. If we break down below the bottom of the hammer, the market should then reach towards the 1.35 level next, which of course will have a certain amount of psychological support as well. A move below there sends this market looking for the 1.33 handle in our opinion. Ultimately though, it would be much easier to take a long position if we get a good job number out of America, and a less than stellar one out of Canada. Ultimately, it’s difficult to imagine that the market can go much farther without too much in the way of resistance. Oil markets of course will have quite a bit of a say in this, so pay attention to the WTI markets specifically, because they seem to be trying to rally, but they are getting fairly close to a lot of resistance.
