This post was originally published on this site.
The USDCAD moved higher at the end of last week following a stronger-than-expected U.S. jobs report and weaker-than-expected Canadian employment data. Fundamentally, that combination should have supported the U.S. dollar against the Canadian dollar.
However, the price action told a different story—and ultimately, price action deals the cards.
The post-jobs rally stalled within a swing area between 1.38669 and 1.3877. Buyers had their shot, but they could not get above that resistance area and stay above it. That failure was the first warning that the fundamental story was not translating into sustained buying.
When a market cannot rally on news that should be bullish, traders need to pay attention. It often signals that the favorable news may already be priced in—or that larger sellers are using the rally as an opportunity to establish positions.
The failed break sent the USDCAD back toward its 200-day moving average at 1.38343. During yesterday’s trading, the price moved above and below that key moving average before finally breaking lower. That tipped the longer-term technical bias more in favor of the sellers.
The downside momentum continued today, taking the pair into a swing area between 1.3765 and 1.3778. The initial test attracted buyers, but the subsequent rebound stalled ahead of the falling 100-hour moving average, currently near 1.38138.
That was another bearish clue.
Not only did the price remain below the broken 200-day moving average, but buyers could not even reach the falling 100-hour moving average before sellers returned. The lower high showed that the sellers were maintaining control of the shorter-term trend.
The price subsequently rotated back toward the 1.3765–1.3778 swing area during the North American session. This time, the floor gave way, with the USDCAD reaching 1.3760—its lowest level since August 21.
The price has bounced modestly, but it is so far trying to remain below—or within—the broken swing area. That area is now the key short-term barometer. Remember, old support often becomes new resistance after it is broken.
For traders, the technical roadmap is relatively straightforward:
-
Staying below the 1.3765–1.3778 swing area keeps the sellers in control and the downside as the favored path of least resistance.
-
The next important target comes near 1.3732. That level represents both the August swing low and a rising trend line, increasing its technical importance.
-
A break below 1.3732 would open the door toward the next swing area near 1.3710.
-
If buyers are going to take back some control, they must first reclaim 1.3778. Above that, the 61.8% retracement near 1.3793 would become the next hurdle, followed by the falling 100-hour moving average near 1.38138.
The stronger U.S. jobs data and weaker Canadian employment report may have given USDCAD buyers what looked like the strongest fundamental hand. However, they failed to play it successfully.
For now, the technical hand belongs to the sellers—and they are holding the strongest cards.
This article was written by Greg Michalowski at investinglive.com.
