USD/CAD rose during the session as the markets reacted poorly to the lack of action brought forth by the ECB for the session on Thursday. After last week's proclamation of "doing whatever it takes" to protect the Euro, Mr. Draghi disappointed the markets by bringing almost nothing to the news conference.
As a result, the US dollar got a bid against most currencies and the Canadian dollar was no different. However, we need to watch the oil markets when trading this pair and it should be said that most of the driving force behind the move today in this currency market was probably based upon light sweet crude.
As these two economies are so intertwined, the nonfarm payroll numbers normally cause some type of violent reaction in this pair. It can be very difficult to trade during these Fridays, and as such is normally one that frustrates traders. However, there is a fairly obvious set of boundaries that we could play off of depending on how the economic numbers come out.
Hammer time!
Thursday formed the second hammer in a row, and more importantly based upon the parity level. It does look like parity is going to offer significant support at this point in time, and as such the move higher is very likely. However, we should recognize the fact that we are in a down trending channel, and it looks as if we are simply bouncing off of the bottom. Add to that the idea that parity is at the same point on the chart, and the bounce really isn't a surprise.
Looking forward, I can see that the 1.0150 level is the start of significant resistance, going all the way up to the 1.02 handle. At the same time, it is also at the top of the down trending channel, and it looks like we could see an attempt to run back to that point on the chart. Any resistive candles in that area will more than likely offer great selling opportunities.
Although I am willing to buy this market on a break of the highs from Thursday, it is the resistance that I see above that makes me think this is a short-term trade only. I will be taking profits up in that area at the very first signs of struggle. Obviously, if we meltdown and break below the parity level to close for the day, this would be a bearish sign and have me selling as well.