The USD/CAD pair did move too much during the session on Monday, but what it did do was fall enough to test the 1.04 support level. At the end of the day, we formed a nice looking hammer, and this suggests that the market will continue to recognize the 1.04 level as a significant area. Because of this, I am actually bullish of this pair but I recognize the fact that it is a relatively tight market, which is very common for this pair as the two economies are so intermingled that the market rarely moves in a significant manner in one direction. Typically, what will happen is that the market grinds away sideways for some time, and then makes a sudden impulsive move in one direction or the other.
That being the case, I feel that this market is ready to try and do that but there is enough resistance above that could cause a bit of an issue. Ultimately, we need to get above the 1.06 level in order to breakout to the upside and move as high as the 1.10 level. I do think that is was going to happen eventually this market, but the area between here and the 1.06 level will be rather choppy.
Nonfarm payroll numbers coming out on Friday
This pair tends to be particularly sensitive to the nonfarm payroll numbers, and as a result I think that the market will try to get above and in front of the next move based upon that announcement. Typically, this pair moves counterintuitively, simply because Canada since so much of its exports into America, that the Canadian dollar needs the US to have a strong work force in order to push the value of that currency higher as the Americans buy more Canadian goods.
Between now and then, I fully expect this market to go higher simply because people will be expecting a poor jobs number. I feel the same way, and as a result will be buying this market on a break of the top of the hammer that formed during the Monday session.
