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USD/CAD Forecast: Volatility Ahead with Key Data

By Christopher Lewis
Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.
  • During the Wednesday session, we saw the US dollar drop somewhat significantly against the Loonie, reaching the 50-day EMA.
  • The 50-day EMA, of course, is an indicator that a lot of people pay close attention to.
  • But more importantly, I think what we're looking at here is a market that is reacting to the risk on behavior of global markets.
  • Therefore, the US dollar has suffered a bit.

In general, I think this is a market that is going to be very noisy over the next two days, mainly due to the fact that we have initial jobless claims coming out of America on Thursday, and then after that we have employment coming out of Canada on Friday. So, this could be a little bit of ground zero, if you will, going forward for the next couple of days when it comes to volatility. Ultimately though, I think you will continue to see the US dollar strengthen over the longer term. It's worth noting that the 1.39 level above is an area that's been massive resistance multiple times in the past, but at this point it still looks like a market that is trying to get above there over the longer term and I do think that comes into the picture.

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On the other hand, though, if we were to break down below the 1.36 level, which would also be just below the 200-day EMA, then this pair would more likely than not fall apart. It would also coincide more likely than not with the US dollar dropping. And if that of course were the case, you would see the dollar drop everywhere.

Bank of Canada, Canadian Employment, and Initial Unemployment Claims

USD/CAD Forecast Today 08/8: Volatility Ahead (graph)

Over the next couple of days, we will have quite a bit of noise to chew through, not the least of which will be the Canadian employment figures on Friday. However, I think you should also pay close attention to the Bank of Canada, and of course the Federal Reserve. Recently, the Federal Reserve has suggested that it is looking at cutting rates, but the Bank of Canada has already done this twice. Given enough time, the interest rate differential will be a driver, but right now I think we have so many different factors going on at the same time that the one thing you can probably count on is going to be choppiness.

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Christopher Lewis
About Christopher Lewis
Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.
 

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