- The USD/CAD had another very strong trading session on Monday to kick off yet another bullish week.
- The 1.37 level above is going to be major resistance, but you can make an argument for an inverse head and shoulders being formed at this point. If we break above the so-called “neckline”, we could be looking into moving all the way to the 1.42 level.
- This is not to say that it will be easy to make that happen, but that’s the so-called “measured move.”
Yes, crude oil will continue to offer a little bit of support for the Canadian dollar, but I believe that the economy in Canada is starting to be a real headwind as to what happens with the Loonie, and traders are starting to take advantage of the relative safety of the US dollar. Ultimately, oil does help to a certain extent, but it is also a situation where the Canadians are starting to see their own economy show some signs of hesitation.
The Last Couple of Days Have Been Overextended
Keep in mind that this Friday is the jobs number for both of these economies, so the rest of this week could be a little bit wonky. Nonetheless, it does look like the US dollar is trying to make a statement, and if we can get a significant close above the 1.37 level, we could see the US dollar really start to pick up momentum. However, you should also keep in mind that the last couple of days have been somewhat overextended, so I would not be surprised at all to see this market turnaround here and continue to carve out a trading range between the 1.34 level and 1.37 level. (If that were in fact the case, we would just be continuing what looks to be the “right shoulder” of the inverse head and shoulders.)
The market recently bounced from the 200-Day EMA, which of course is an indicator that attracts a lot of attention. You should also keep an eye on the fact that back in March, there was a lot of noise just above the 1.37 level leading to the 1.38 level. In other words, even if we do break out from here it could be very noisy and choppy along the way. That would line up with a week that features jobs from both economies as well.
Ready to trade our daily Forex forecast? Here’s some of the best regulated forex brokers in Canada to check out.