By: DailyForex.com
The USD/CAD pair fell during the session on Wednesday, and quite rapidly. However, we saw quite a significant bounce from the 0.9950 level, which is where the 200 day exponential moving average currently resides.
Because of this bounce, we formed a nice-looking hammer right at the parity level. And it is because of this, we have a couple of different reasons to become bullish. We have broken back over the 200 day exponential moving average for the first time since July, and have retested it. This suggests that the 200 day moving average will start offering support now as opposed to resistance.
The parity level was the bottom of a massive consolidation range that extended all the way to the 1.04 level. In fact, the parity level was support the when all the way down to the 0.99 handle. It is at this point time that this pair is looking more and more likely to return to that consolidation range, and make a break for the 1.04 level.
Watch the Oil Markets, Nonfarm Payroll Numbers
Over the next couple of days, you will have to pay attention to the oil markets in order to trade the Canadian dollar. While this is generally the case, the oil markets are currently sitting on massive support. If that support gives way to the sellers, we could see a strong selloff in that commodity and in turn a strong selloff in the value the Canadian dollar.
You should also be aware the fact that this Friday is the nonfarm payroll numbers announcement. With the US jobs data coming out, this pair will be greatly affected by that number as it always is. This is because the two economies are intertwined, and the Canadians need a strong labor force in the United States to buy all of their products. After all, Canada exports over 80% of its goods to the United States. This is why when the nonfarm payroll number is poor out of the United States, this pair actually rises.
With this in mind, it's very likely we may go sideways for the next 48 hours. However, by the end of the day Friday we could have a very clear signal. If we managed to break above the highs from the Tuesday session, I am going to go ahead and start buying this pair.