The USD/CAD as been rallying sharply since July in 2014, and has actually picked up steam in January of 2015. The market continues to fade the CAD after the BoC’s surprise rate cut a few weeks back.
From the central bank standpoint, the FOMC is still projecting a mid-2015 rate hike, while the BoC just recently cut rates, and has lowered its economic projection. This supports further upside in the USD/CAD.
In the short-term however, we are finally seeing some resistance as the pair tags 1.2798.
This week, after a failed attempt to threaten the 1.2798 high again, price is starting to retreat. In the 4H chart, we can see that 1.25 is a previous resistance and where the 50-period SMA resides. Look for support here, especially if the RSI also stalls around 50.
Below that the 1.2313 support pivot would be the next barrier and should provide support especially if the RSI tags 40 and stalls.
The daily chart shows the acceleration since January to an already persistent uptrend. Today’s price action so far doesn’t say much, but with the daily RSI showing bearish divergence in the overbought area, the dip today might have more weight as a signal for bearish correction in the short-term.
Still, we should expect support in that 1.23-1.2313 area.
This week’s key fundamental factors for the USD will be Friday’s Non-Farm Payroll report. It is expected to show about 231K jobs added in January. This is not bad, but not impressive as long as the reading is under 250K.
From the CAD side, we will also see employment data on Friday. It has been rough for Canada’s job market as it saw declining job numbers in the past 2 months. It is expected to gain by 5.1K after a December reading of -4.3K.
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