You can trade the Canadian Dollar either against the US dollar or against other currencies on the forex dance floor. For short-term traders, Friday could be a good opportunity to trade the possible volatility that could be created at 2:30 PM GMT, once the Canadian employment change and the US Non-Farm Payroll reports are both out at the same time. Here is what you could expect and some trading strategies.
The US Dollar Side
The Federal Reserve Beige Book, published yesterday, showed a lot of the US economy is already being bolstered by lower oil prices. Vehicle sales are up, as is restaurant spending an retail sales. The fall is likely to have a full circle effect in online retail as people spend more on goods, which are cheaper to put on trucks and deliver which boosts profitability and encourages more spending.
The FT runs an interesting story that suggests the fall in oil prices is likely to mean that the tens of billions of dollars that Opec members have spent internationally on various investments is likely to need to be repatriated as their cash piles dwindle. This could cause further liquidity squeezes and spur the rise of the Dollar.
On Friday, analysts are expecting the US to have added 231,000 jobs in November, a faster pace of increase compared to the previous month’s 214,000 gain. This should be enough to keep the jobless rate steady at its six-year low of 5.8%. Aside from that, average hourly earnings are expected to show a 0.2% gain, reflecting stronger wage growth.
We are kinda getting used to the fact that each month the U.S. averages more than 200,000 in hiring gains. But this particular time is the last NFP of the year! So it could still spark a lot of action. A much higher than expected NFP reading might seal the deal for a dollar rally until the end of 2014 while a weak figure could bring Mrs. Doubtfire sentiment back to the forex dance floor.
The Canadian Dollar Side
Mr. Canadian Dollar AKA Loonie in the FX geeky world has been doing well despite the fact that oil prices has been dropping. The secret lies in Canada’s latest economic report which printed a bunch of good stuff:
– Three consecutive months of stronger than expected inflation
– Stronger than expected manufacturing sales and wholesale sales As for Canada, hiring gains could come around to just 5,300 in November, weaker compared to the previous month’s 43,100 increase. If so, the jobless rate could tick higher from 6.5% to 6.6% for the month.
– Sparky employment situation with 43.1K jobs added in October alone
– Smooth trade activity with upside trade balance.
All the above could be hinting a potential recovery in the labor market. Another stronger than expected employment change reading might lend more support to Mr. Loonie.
Trading Strategy
Trading USD/CAD as the reports are out could be tricky especially if both reports are out better than expected. Personally I believe trading each of these currencies against another more stable currency (at the time) could be a better short term option.
For example, CAD/JPY, because the Japanese traders and finance ministers will already be heading into the weekend so the Japanese Yen would be dragged by Mr. Loonie depending on the data.
On the daily forex dance floor the pair has already reached a 5 year high at 105.30 and currently testing this level. A break above this level could open doors for more gains towards the resistance level at 107.20.
Otherwise, we could see a reversal Double Top pattern formation which could only be confirmed if the pair pulls back towards the 103.60 level.
For those insisting on USD/CAD, the pair started a passionate upward move in June on the daily forex dance floor, until it hit the resistance level at 1.1460, which has slowed down the gains. This could be attributed to the fact that both Ms. USA and Mr. Loonie are getting better at the forex dance and are appreciating. They are now trapped in a triangle while remaining close but still above the Ichimoku cloud. Friday could be the big day that decides the fate of the pair… A break above the Triangle pattern could (meaning US dollar being way stronger than Canadian dollar) could bring the pair to the next level which is 1.1660. Otherwise, we could expect a pullback towards 23% Fibonacci level at a.1260.
So if you have a strong bias on how the jobs reports might turn out, you can go ahead and place your order now… After checking with all points of Invest Diva Diamond Analysis, that is.
Intraday Forex Technical Levels
EUR/USD 4-hour: Rebounding.
Invest Diva positioning: Short positions below 1.2412 with targets at 1.2356 and 1.2299 in extension.
Technical reasons why: The pair reached our bearish target at 1.2299 below the Ichimoku’s cloud and jumped up. The RSI is moving above the oversold zone.
Alternative Scenario: Above 1.2299 look for further upside towards 1.2481 and 1.2559.
Where I’m setting my stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 1.2356 | 1.2412 | 1.2559 |
| 1.1229 | 1.2481 |
GBP/USD 4-hour: Trapped within the triangle.
Invest Diva positioning: Short positions below 1.5705 with targets at 1.5591 and 1.5481 in extension.
Technical reasons why: The pair is forming the triangle chart pattern below the Ichimoku’s cloud. The RSI is around the neutrality area.
Alternative Scenario: Above 1.5705 look for further upside towards 1.5817 and 1.5887.
Where I’m setting my stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 1.5591 | 1.5705 | 1.15887 |
| 1.5481 | 1.5817 |
AUD/USD 4-hour: Moving down.
Invest Diva positioning: Short positions below 0.8387 with targets at 0.8318 and 0.8214 in extension.
Technical reasons why: The pair is moving within the bearish channel and broke below the previous bottom at 0.8387 below the Ichimoku’s cloud. The RSI is heading down just above the oversold zone.
Alternative Scenario: Above 0.8387 look for further downside towards 0.8507 and 0.8581.
Where I’m setting my stops and limits:
Support Levels Turning Point Resistance Levels
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 0.8318 | 0.8387 | 0.8581 |
| 0.8214 | 0.8507 |
NZD/USD 4-hour: Rebounding.
Invest Diva positioning: Long positions above 0.7746 with targets at 0.7795 and 0.7835 in extension.
Technical reasons why: The pair is rebounding from the 23% Fibonacci level at 0.7746 below the Ichimoku’s cloud. The RSI is moving below the neutrality area.
Alternative Scenario: Below 0.7746 look for further downside towards 0.7667 and 0.7630.
Where I’m setting my stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 0.7667 | 0.7746 | 0.7835 |
| 0.7630 | 0.7795 |
USD/JPY 4-hour: Moving up.
Invest Diva positioning: Long positions above 119.78 with targets at 120.88 and 121.76 in extension.
Technical reasons why: The pair continues move above the Ichimoku’s cloud amd is now consolidating at our bullish target at 119.78. The RSI moves slightly below the overbought zone.
Alternative Scenario: Below 119.78 look for further downside towards 118.86 and 117.50.
Where I’m setting my stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 118.86 | 119.78 | 121.88 |
| 117.50 | 120.88 |
USD/CHF 4-hour: Back to the key resistance level.
Invest Diva positioning: Long positions above 0.9726 with targets at 0.9770 and 0.9815 in extension.
Technical reasons why: The pair once dropped to 23% Fibonacci level but back to the key resistance level at 0.9726 above the Ichimoku’s cloud. The RSI is around the neutrality area.
Alternative Scenario: Below 0.9726 look for further downside towards 0.9649 and 0.9601.
Where I’m setting my stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 0.9649 | 0.9726 | 0.9815 |
| 0.9601 | 0.9770 |
