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Chart Of The Day: Make Or Break For USD/CAD

By Fawad RazaqzadaForexFeb 05, 2021 10:19
uk.investing.com/analysis/chart-of-the-day-make-or-break-for-usdcad-200455024
Chart Of The Day: Make Or Break For USD/CAD
By Fawad Razaqzada   |  Feb 05, 2021 10:19
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This article was written exclusively for Investing.com

This week’s mostly stronger US macro data has raised expectations that the nonfarm jobs report could beat expectations today. As we will also have the Canadian employment report released at the same time as the US nonfarm payrolls, the USD/CAD is an interesting FX pair to watch as it could set the scene for the next several trading days.

The US dollar has been on the ascendancy since the turn of the year, despite the ongoing “risk-on” and “reflationary” trades. In these conditions, you would think the more risk-sensitive Canadian dollar would perform better, given that equities and especially crude oil prices have been rallying, while safe-haven assets have been undermined. Yet, the USD/CAD has been edging higher, along with most other dollar pairs such as the USD/EUR and USD/JPY.

But can today’s North American jobs reports help to put that right, or are we going to see a complete trend reversal for the Loonie?

Well, so far, the USD/CAD’s revival can best be described as a countertrend move, for rates have not formed a major higher high yet. Indeed, at the time of writing, the USD/CAD was struggling to break its bearish trend line that has been in place since this North American currency pair topped back in March last year:

USD/CAD Daily
USD/CAD Daily

It is important that the bears now manage to defend the above trend line for price to maintain its bearish bias and attract fresh technical selling below it. However, a break above the trend line has the potential to lead to a 100-pip rally towards the key 1.2950 resistance level, which was a significant support in the past. 

So, it is possible we may see a temporary break above the trend line and some further technical buying. But insofar as a complete trend reversal, that will be dependent on what happens at 1.2950 should price get there. A clean break above 1.2950 would form the first higher high, and as such end the short-term bearish bias. 

But until and unless that happens, I would still be looking for bearish rather than bullish setups on this pair and bullish setups on other CAD crosses such as the CAD/JPY etc. The trend is your friend as the saying goes (…until that friend stabs you in the back). Happy Friday.

Chart Of The Day: Make Or Break For USD/CAD
 

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Chart Of The Day: Make Or Break For USD/CAD

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Comments (1)
Joana Adosinaba
Joana Adosinaba Feb 05, 2021 10:29
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Hahaha. I liked your last statement “until that friend stab you in the back.” Thanks for the insight. 👏🏽
 
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Disclaimer: Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warrant that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, nor does the author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
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