USDCAD Retracement Setup (Jan 8, 2016)
USDCAD has been breaking past one high after another in the past few days, as risk aversion and falling oil prices have weighed on the Canadian dollar.
It seems that the pair has topped at around 1.4170 and may be ready for a pullback to an area of interest.
Applying the Fib tool on the latest swing low and high shows that the 50% level coincides with the broken resistance at the 1.4000 major psychological level. This is also close to the 100 SMA, which might hold as a dynamic support zone.
Speaking of moving averages, the short-term 100 SMA is above the 200 SMA so the uptrend is likely to carry on. Meanwhile, stochastic and RSI are both on the move down, indicating that the pair might still be in the middle of a correction.
Yesterday, the Ivey PMI release from Canada printed dismal results, as the index fell from 63.6 to 49.9 to indicate industry contraction. Analysts had only been expecting to see a drop to 56.7. In addition, oil prices have continued to tumble, putting additional downside pressure on the positively-correlated Loonie.
Later today, the US NFP report might yield big moves for this pair, as strong data could spur more gains for the US dollar. Market watchers are looking out for a 203K gain, slower than the previous 211K increase, although revisions could still be seen.
Also due today is Canada's jobs report, which might indicate a 10.4K increase in hiring. Their jobless rate is expected to hold steady at 7.1% but weak figures could remind traders that the BOC might pursue another round of rate cuts to keep the economy afloat.
By Kate Curtis from Trader's Way