By: Christopher Lewis
The USD/CAD pair had a rough session on Thursday as the market first fell, and then popped at the end of the day. The pair is one of the most volatile ones when it comes to Non-Farm Payroll Fridays, and as a result it can be one of the high flyers for the day.
The Canadian economy is one that is highly dependent on the American one. After all, 85% of all Canadian exports find their way into the United States. This is why the jobs number carries so much weight for this pair; it directs the flow of money in and out of the US. The jobs number is being watched especially so this month as the Federal Reserve Chairman has suggested that the Fed has more tools in which to help the economy if it falters.
The pair has been consolidative lately, and is desperately in need of a catalyst to break out of the 200 pip range it has been stuck in. The 0.98 to 1.00 level has confined the market lately, and it is in those parameters that most of the moves have been made. However, this pair has a long history of going sideways and suddenly making an explosive move. It could be that we are about to do this.
0.98 is crucial, so is 1.01
The pair has an overall bearish tone to it. The 200 day exponential moving average is drifting lower, and the parity level has been like a rock when it comes to resistance. The market has been chopping around as the oil markets, one of the biggest drivers of this pair, have also been back and forth. The oil markets have a lot of fundamental factors that are unclear, therefore this pair is unclear. Because of this, we need to look at the larger picture and this is why I have been very leery about anything more than a scalp in this market.
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The breaking below of the 0.98 level is what I need to see in order to sell. I think this jobs number could be the catalyst, and a daily close below it has me selling. As for buying, it is very difficult to see that being a reasonable move until well above the 1.01 level. Parity could also provide a selling opportunity if we rise, but this would only return us to the choppiness from before.