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USD/CAD Daily: Heading up above Ichimoku Cloud and 23% Fibonacci
As pointed out in my previous Loonie update, the pair fulfilled a reversal after the formation of three black Crows forex candlestick pattern above 23% Fibonacci, after forming a spinning top forex candlestick pattern at our first pivot level of 1.2180. The pair is now rapidly moving towards our next target and previous high of 1.27. We could see a pullback again because the new bullish sentiment seems to be exhausted with the long weekend coming up.
The US unemployment rate came in at 5.3% better than the 5.4% expected and better than last month’s number of 5.5%. However the number of employed people during the previous month, excluding the farming industry came in worse than analysts’ expectation at 223K, down from May’s 254K. This created mixed signals for Mr. USA on the forex dance floor and hence we saw a spinning top candlestick pattern again Mr. Canada.
Not much out of Canada this week with the country just celebrating Canada Day yesterday, Mr. Loonie is mostly dragged by Ms.USA on the forex dance floor. While Canada’s inflation no longer seems to be a problem thanks to its positive correlation to crude oil, the trade activity has fallen short of expectations in the past quarter.
So, are we gonna be seeing a strong Mr. Loonie? Maybe, maybe not. While the overall labor data is good, remember that Canada has an export-driven economy. And 25% of Canada’s exports are energy commodities (e.g. oil). And that energy-rich provinces aren’t doing very well.
Apart from that, a strong Loonie would make Canada’s exports less competitive. In its latest monetary policy statement, the Bank of Canada (BOC) also hinted that a strong Loonie could be a problem when it stated that the “Canadian dollar has strengthened in recent weeks in the context of higher oil prices and a softer U.S. dollar. If these developments are sustained, their net effect will need to be assessed as more data become available in the months ahead.”
We have Canada’s Purchasing Managers’ Index (PMI) coming up next Monday at 3 PM GMT which could give us more clues about the country’s economic health. A negative release could push the USD/CAD pair higher up.
We could see a pullback to 1.25 followed by a rally. Trade bullish above 23% Fibonacci targeting 1.27
Suggested stops and limits:
|Support Levels||Turning Point||Resistance Levels|
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