Today’s Forex Guide

NY Market Open Review | USD/CAD Analysis


Sep.03.2015

10:00 AM EST

Thank God China is on holiday today so at least we don't have any surprises from THAT end! However we did have our fair share of surprises upon New York market open. Mr. Euro fell sharply as European Central Bank President Mario Draghi announced lower growth and inflation forecasts. This is good news for Invest Diva students who are currently in a bearish position for the EUR/USD pair.

However, Ms. USA (aka US dollar) got somewhat bad news as US jobless claims rose. But so far, that may only affect her short-term up-moves on the forex dance floor. Currently she seems to be strangled in a very passionate dance pattern against Mr. Canadian dollar. Let's take a look at the pair's story and possible trading strategies.

Economic Points

US side

Thursday's New York session started with a negative kick as the dollar was bolstered by worse-than-expected US jobless claim figures. The number of Americans filing new applications for unemployment benefits rose more than expected last week, but the underlying trend remained consistent with a strengthening labor market.

Initial claims for state unemployment benefits increased 12,000 to a seasonally adjusted 282,000 for the week ended Aug. 29, the Labor Department said on Thursday. Claims for the prior week were revised to show 1,000 fewer applications received than previously reported. Economists had forecast claims rising to 275,000 last week.

The good news is that the jobless claims data has no bearing on Friday's closely watched employment report for August as it fell outside the survey period. According to a Reuters survey of economists, non-farm payrolls (NFP) likely increased by 220,000 last month after rising 215,000 in July. So we could still see a change of fate for Ms.USA in the end of the trading week.

Keep in mind that the Fed is keeping a close eye on the gradual growth of the US economy and this negative jobless data could just have shaken off the hopes of the last optimists on a September rate hike.

Canada Side

Mr. Loonie had a way better week comparing to Ms. USA as Canada saw massive growth on GDP (from -0.2% to 0.5%) on Tuesday and better than expected trade balance (-0.6B comparing to -1.4B expected) on Thursday morning.

We yet have Canada's employment change to come out on Friday. For the month of August, economists and forex traders are expecting the jobless rate to remain steady at 6.8% while the net change in employment is expected to drop by around 5K.

While Canada's most recent economic figures aren't too bad, and the GDP growth was rather impressive this week, some analysts still claim that Canada is already in a recession or on the verge of heading into one, which would likely cause some forex traders to take a bearish stance on Mr. Loonie.

Keep in mind that the upcoming employment change reading is expected to deteriorate. Also note that oil prices have been declining recently after staging a three-day rally, dampening demand for the Loonie in the process.

Technical Analysis

After reaching our target of 1.30  and 1.3250 respectively, the USD/CAD pair now seems to be trapped in a triangle. Upon Thursday's worse than expected jobless claims, Ms. USA tumbled and fell back inside the  Ichimoku Cloud on the 4 Hour chart.
USDCAD 4 hour chart technical analysis Ichimoku cloud forex trading strategy

However the monthly chart still shows a bigger picture of an uptrend. The breakabove the neckline of  a saucer bottom chart pattern (or some may call it a double bottom) at 1.28 on the monthly forex dance floor, created a new-born bullish sentiment in the pair. While we could see drops back to the 23% Fibonacci and the saucer neckline at 1.29, the door for the next wave of bullish dance moves is still open. 

Our next targets are set at 1.3450 and 1.37 in extension.

USD/CAD Monthly

Alternative Scenario

From a long term percpective, a break below 1.22 would change our outlook to bearish with 1.1950 as first alternative target

Suggested stops and limits

Support Levels Turning Point Resistance Levels
1.28 1.3250 1.3450
1.22 1.30 1.37

*Important Note: The support and resistance levels are not suitable for all traders and largely depend on your account size, margin and leverage. Book a private lesson to learn how to personalize your account based on our trading guide.
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