- The USD/CAD initially tried to rally during the trading session on Friday, touching the bottom of this rising wedge that I had drawn on the charts.
- We have since seen the market get punched in the face, which makes quite a bit of sense considering that the US employment figures were slightly better than anticipated, beating by about 20,000, while the Canadian employment figures beat by almost 90,000!
More importantly, the US dollar has sold off in general, maybe as people are starting to look at the inflation coming out of wages starting to slow down. If that’s going to continue to be the case, then I think you’ve got a bit of a perfect storm I had, therefore you need to pay close attention to what happens next. If we do continue to break down from here, I would anticipate that the US dollar could go looking to the bottom of the rising wedge, which happens to coincide quite nicely with a 200-Day EMA, which sits just above the 1.32 level. Ultimately, that’s an area that I think could be a short-term “floor in the market”, but we will have to wait and see.
Waiting for a Pullback
If we turn around and recapture the 1.35 level, that is possible that we could try to head back to the top of the candlestick, but right now it looks as if we are very tired, and what I find interesting is that even though oil markets have underperformed during the trading session, the Canadian dollar still shows signs of strength. The size of the candlestick is rather impressive, so I do think that we have a little bit of follow-through.
The question at this point is going to be whether we can stick to the downside with those losses. I don’t know the answer to that quite yet, and quite frankly these big moves that have been more “risk on” recently have lasted roughly 1 or 2 trading sessions before the market turns right back around. I can’t necessarily say that it’s going to be anything different at this point, so unfortunately a bit of caution is probably warranted with any position that you put on, as the noise is probably going to get worse, not much better. At this point, this pullback could still find plenty of buyers.
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