USDCAD Forex Forecast – Short-Term Pullback?

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USDCAD has been on a strong rally but seems to be encountering resistance near the 1.3150 minor psychological level, opening the opportunity for a pullback. Applying the Fib tool on the latest swing low and high on the 1-hour time frame shows that the 61.8% Fib lines up with a former resistance level ner the 1.2950 minor psychological level.
Meanwhile, the 50% Fib coincides with the 200 SMA dynamic support and the 23.6% Fib lines up with the 100 SMA, all serving as potential correction levels. The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. If any of the Fib levels keep losses in check, USDCAD could resume its climb to the previous highs or beyond.
Stochastic still seems to be heading lower but is already near the oversold region, which suggests that selling pressure could fade soon and allow buyers to take over. However, if sellers keep pushing price lower, USDCAD could make its way to the next support around 1.2800.
Economic data from the US came in weaker than expected yesterday, as the ISM manufacturing PMI tumbled from 52.6 to 49.4, reflecting industry contraction. Analysts had been expecting to see a drop to 52.0. The employment component featured a sharper contraction, leading some to predict that the NFP figure will miss expectations.
An increase of 180K in hiring is expected for August, lower than the earlier 255K gain, although revisions to previous data can still be made. Keep in mind that the ADP report printed a stronger than expected 177K gain for the same month while the previous reading was upgraded to 194K.
As for Canada, its current account balance turned out much weaker than expected due to slower export activity. The trade balance is due today and a deficit of 3.2 billion CAD is eyed, smaller than the earlier 3.6 billion CAD deficit. Quarterly labor productivity data is also due from Canada and a 0.2% uptick is eyed.
To contact the reporter of the story: Samuel Rae at samuel@forexminute.com
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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.