The USDCAD has started the week on a bullish note, as the Canadian Dollar struggles to hold on to price advances it made on Friday against the greenback following the divergent direction of the jobs reports of both countries.
The USDCAD had lost ground on Thursday and Friday as dismal jobs numbers shook the pair. Canada’s jobs numbers stood at -1993.8K, which was far better than the -4000K that was predicted, with an unemployment rate of 13%. Traders adjudged these figures to be better than the US NFP, which showed an employment change of -20,500K (consensus of -22,000K) and an unemployment rate of 14.7%, thus providing a basis for the selloff on the pair.
The USDCAD is currently 0.47% higher, as bulls sent the pair into a rally that has taken it more than 100 pips from Friday’s lows. However, the rally has stalled at the 1.40 resistance area after Saudi Arabia’s commitment to cut its production quota by an additional 1 million barrels per day in June. This move has sent crude oil prices on the WTI benchmark higher and stalled the USD advance on the Loonie.
The price action currently forms higher lows and lower highs, which is the picture seen in a price consolidation formed by the symmetrical triangle. The technical expectation is for the price to break out of the triangle in the direction of the initial trend. This move requires a push above the current resistance at 1.40, where we have the highs of 13 April and today, as well as previous lows of 17,18,23 April and 5 May. The 50% Fibonacci retracement from the swing low of 5 March to the swing high of 18 March are found here.
A successful advance beyond this resistance allows the price to aim for the upper triangle border. A breakout will require a breach of this border and a subsequent rise by a 3% penetration beyond the resistance levels formed by the 38.2% Fibonacci retracement and the 27 March, 20 April, 5/6 May tops at 1.41514. Further resistance levels lie at 1.42746 (26 March and 21 April tops) and 1.43431 (23.6% Fibonacci level).
On the flip side, a breakdown of the lower triangle border would require a 3% penetration move that is also able to take out the 1.38605 price level (13, 14 and 30 April lows and 61.8% Fibonacci retracement). Therefore, a breakdown of this level allows the USDCAD to aim for the 1.37629 support. The 1.36961 and 1.36286 (78.6% Fibonacci retracement) price levels are also waiting in the wings to make their presence felt if the decline continues.