Title: USD/CAD Technical Outlook: Loonie Strengthens on Canadian Jobs Data, But Markets Await Further Direction
Original article by Greg Michalowski, InvestingLive.com
The USD/CAD currency pair experienced notable shifts on the trading charts following a recent wave of economic data from both the United States and Canada. The Canadian dollar, often referred to as the “loonie,” initially strengthened against the U.S. dollar after robust Canadian employment figures were released. However, despite this downward pressure on USD/CAD, the currency pair rebounded from intraday lows as technical support zones held firm. The next directional move may hinge on upcoming data, central bank policies, and momentum indicators currently in play.
This article offers a deeper analysis of the technical and fundamental drivers influencing USD/CAD and outlines key areas to watch for traders and investors in the coming days.
Overview: Recent USD/CAD Price Action
On November 3, 2023, Statistics Canada released employment figures that surpassed market expectations. The strong print lent immediate support to the Canadian dollar, causing USD/CAD to fall sharply. However, soon after the dip, USD/CAD began bouncing back from the lows, indicating that buyers were stepping in at significant technical support levels.
Key Highlights:
– Canadian employment jumped by 17,500 jobs in October, exceeding expectations of around 10,000.
– The unemployment rate edged up slightly to 5.7% from the previous 5.5%, suggesting more people may be entering the labor force.
– U.S. Nonfarm Payrolls (NFP) also surprised with stronger-than-expected employment gains, limiting USD/CAD downside.
– USD/CAD initially fell to a low of 1.3626 but recovered to trade above the 1.3650 level by the end of the trading session.
The interplay of data from both sides of the border has kept the pair within a well-defined technical range, giving traders an opportunity to play both support and resistance levels.
Technical Analysis of USD/CAD
Despite the volatility brought on by recent job reports, USD/CAD continues to respect its technical levels. As Greg Michalowski highlighted in his analysis, price action reveals a market that remains range-bound but responsive to key indicators.
Support and Resistance Zones:
– Support Levels:
– 200-hour moving average: Around 1.3626, which marked the low after the post-NFP/Canada jobs movement.
– A price floor going back to earlier sessions at 1.3616.
– Psychological round-number support at 1.3600.
– Resistance Levels:
– 100-hour moving average: Currently sits around 1.3663.
– The 1.3700 level has acted as a ceiling in recent sessions.
– Further resistance at 1.3750, which aligns with October highs and a previous consolidation zone.
Moving Average Indicators:
– The 100-hour moving average capped upside momentum after the initial post-data rebound.
– The 200-hour MA, which held as support, continues to act as a line in the sand for short-term bulls and bears.
– Any breach of these moving averages on either side will likely dictate near-term direction.
Trendlines and Chart Patterns:
– A symmetrical triangle is forming on the 4-hour chart, indicating a potential breakout pattern in the days ahead.
– Aggressive traders might aim to trade the range, while conservative traders may wait for a decisive break.
Momentum Indicators:
– RSI (Relative Strength Index) on the hourly and 4-hour charts suggests neutral momentum, with readings around 50.
– MACD remains slightly positive but not showing conviction on the bullish side.
Market Sentiment and Positioning
According to the Commitment of Traders (COT) report from the Commodity Futures Trading Commission (CFTC), speculative traders increased their net short positions in the Canadian dollar in recent weeks. This could suggest vulnerability to short-covering rallies should Canadian data continue to surprise to the
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