- The US dollar has gone back and forth during the trading session on Friday, as the Canadian employment numbers came out weaker than anticipated.
- Ultimately, the USD/CAD pair has been paying close attention to the 1.3750 region, which is an area that had previously been a major resistance barrier multiple times.
- Furthermore, we also have the 50 Day EMA in that neighborhood, and I think ultimately that is another thing that comes into the picture that keeps people involved.
Technical Analysis
The technical analysis for this market is rather simple, and I think a lot of people are looking at the same thing at the same time. That of course is that the market has recently broken out all of the consolidation area, rallied to test the 200 Day EMA, and then pulled back to retest the previous resistance. The question now is whether or not we can continue to go higher, but if the previous momentum is to be believed, that’s exactly what I would expect.
If we were to break down from here, then I think you have a serious problem just waiting to happen, perhaps sending the market back down to the 1.3550 level, an area that has been tested 3 different times. That would of course be a major barrier to break to the downside, and quite frankly I just don’t think that happens. The interest rate differential between the United States and Canada remains pretty large, and of course the trade war between the 2 countries continues to be a serious problem for markets, especially when trying to take into account the Canadian economy is so desperately attached to the United States. With the employment dropping pretty significantly, that suggests that the US tariffs are really starting to put a lot of pressure on the Canadians, and that could have the central bank doing everything it can to loosen monetary policy going forward. The tariffs and the rhetoric seems to be never ending, and as a result I believe eventually the US dollar continues higher.
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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.