USDCAD, H4 and Daily
Canadian data arrives today in the form of the June employment report release, which is expected to rise to 25.0k after the 7.5k dip in May and 1.1k dip in April. The unemployment rate is expected to hold at a 40-year low 5.8%. Trade data is also due, expected to reveal a widening to -C$2.2 bln in May from -C$1.9 bln in April, as rising oil prices continue to lift the value of energy exports.
Another gain in exports would add to the evidence that Canada’s economy is breaking good after a disappointing start to the year. And growth in M&E imports would hit BoC’s forecast sweet spot. The Bank looks set to hike rates next week. An encouraging trade report, combined with the expected resumption in job growth during May (also due Friday) would further underpin the case for the 25 bp rate hike in July.
USDCAD has settled in the mid 1.31s after correcting from a 1-year high that was pegged at 1.3387 last Wednesday. Expectations for BoC to hike rates next week along with the big surge in oil prices have buoyed-up the Canadian Dollar. However the strengthening of the Loonie noticed for 6 consecutive days cannot be sufficient for turning the overall asset’s momentum from positive to negative. The USDCAD moves within an upchannel in 2018, retracing nearly 75% of the losses seen during 2017.
The latest bearish momentum identified, drift the pair down to the confluence of latest monthly up fractal and the 61.8% Fibonacci retracement level, which it looks to support the pair quite strongly the past 6 days. The weak daily candles formed this week suggest that the bearish pressure is running out of steam. The technical momentum indicators on the other side remain in to support the bearish bias. RSI sloped lower to 51, while MACD oscillator decreased below its trigger line but remains within the positive area so far.
By observing the daily time-frame, the technical tools except Volume indicator, propose the continuation of the downside momentum for the pair. Volume indicator triggered our attention as it presents that volatility to the downside is decreasing. This along with the small body candles indicate that the recent move lower might be just a correction to the long term rally. In the daily chart USDCAD has Resistance at 1.3210-11. Support holds at June’s peak, at 1.3050-1.3065.
The short term view matches the long term view as it is also suggesting further negative momentum for USDCAD. RSI raise up to 42 but remains below 50 while MACD is flattening below neutral and sightly above its signal line.
Hence if the pair manage to break and to remain today above the immediate resistance level at the round 1.3200, which coincides with the 20-day MA, could imply to a possible ending of a the negative bias and will open the way to the next Resistances at 1.3220 and 1.3330.
On the downside, if he pair remains today around or below the 61.8% Fibonacci retracement level at 1.3130, then bears are still in control. A break of the 1.3050 Support could lead to a swing lower to the next Support levels at 50-day MA and 200-day MA, at 1.2920 and 1.2775 respectively.
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