The first Friday of the month is usually very busy for the USD but also the CAD. Friday’s usually the day we have job data from both those markets, and they shake up the charts. This Friday was better for the American currency as the nonfarm payrolls and the unemployment rate were both better than expected.
In Canada, the unemployment rate dropped, but the change was negative, a lot further below expectations. After that, it was a no-brainer for traders which direction to choose, and the USD/CAD ended at monthly highs.
Monday brings us quite a big correction, which you may find surprising because there isn’t a fundamental explanation for that. There doesn’t have to be because not every move on the chart has to be explained by the data/events or statements.
Sometimes it’s just pure consensus between demand and supply based on one of the technical factors, in this case – a horizontal resistance on the 1.295 (lower green). Since December last year, this level has been important, and traders respected it once more.
Today’s bounce is part of something bigger, though. The price is creating a right shoulder of a big H&S pattern (yellow). The formation isn’t active yet as the neckline (red) is intact. The price breaking the neckline will be a real, mid-term sell signal, but that’s still a hypothesis.
The sentiment on USD/CAD will remain negative as long as the price stays below 1.295 or even 1.308 (upper green), which has gained some importance over the last few months. The target for the next few weeks is the black up trendline, and the chances that we’ll get there are quite high.
