USD/CAD has been trending higher since bottoming on October 2 near 1.3472. Momentum over the past eight trading days has pushed the price to a high of 1.37826. Taking that price to the bottom of the next targeted swing zone between 1.3784 and 1.38036 (back to April 2024 – see red numbered circles on the chart below).
Today, Canadian jobs data came out stronger than expected, and the USD/CAD rate fell (CAD higher). The price is back below the 61.8% retracement of the downward move from the August high. This level comes at 1.3745. However, it was not possible to maintain the momentum, and the price went back up. Going forward, it will take a return below the 61.8% retracement to give sellers more comfort.
Is the sale over? What might increase the bullish bias once after a sharp move down?
Will a stronger number not implement the Bank of Canada’s interest rate-cutting agenda?
Drilling down to the 5-minute chart below, late yesterday’s price action saw the price pull back to test the high of the 200-bar moving average (green line on the chart below).
In today’s Asian session, the price moved below the lower moving average line, but the downward momentum was not strong. Instead, the price traded higher with the moving average line (see green line on the chart below) and then moved above the two moving averages and used the moving average levels as a springboard to higher levels before the jobs report.
When employment data came in stronger than expected, the price fell sharply below those moving averages, but has since rebounded. The bounce has brought the price back to those moving averages and is now above them. This made short trades confused and short trades covered. Buyers are back in control above those moving averages.
The question is, can the price stay above those moving averages?
If possible, there could be some eyebrows and more short-covering as levels off the 4-hour chart rise to 1.3803. If the price can’t go higher – or fails on the breakout above – sellers are still “in the market” and we will see more downside with the 100/200 moving averages on the 5-minute chart, and the 61.8% retracement pullback in the 4-hour chart at 1.3745 where it should be. Break targets to increase downside slope.