After it continuous selloff since March this year, USD/CAD has made a forex retracement over the past month as it pulled up to the 1.0900 major psychological level. This has acted as support in the past and, since it lines up wit the 50% Fib forex retracement level, it might act as resistance moving forward.
Stochastic is moving down from the overbought zone, indicating a buildup in selling pressure. A selloff from the pair’s current levels might last until the previous lows at the 1.0600 area if the downtrend resumes. A higher pullback could take the pair up to the next resistance area around the 61.8% Fibonacci forex retracement level or the 1.1050 minor psychological mark.
Shorting at market with a wide stop above 1.1050 and a target of 1.0600 could yield a good return on risk for a long-term trade.
Forex Retracement Forecast
Geopolitical tension and Russian sanctions could lead to upside pressure on oil prices, which could then drive the Canadian dollar higher. Bear in mind that the currency has a positive correlation to crude oil, which means that price gains could lead to Loonie appreciation.
Canada’s employment report could pose an event risk for this trade, as another weaker than expected reading could mean more losses for the Canadian currency. For the month of July, the economy is expected to show around 20K in hiring gains, enough to rebound from the 9.4K in job losses for the previous month.
In that case, the Canadian dollar could renew its climb against the US dollar, as the US economy has recently printed a bleak jobs report. The latest FOMC statement indicated that the Fed isn’t looking to tighten monetary policy anytime soon, but the BOC statement has come up with a more dovish tone.
With that, there’s enough momentum for a USD/CAD pop higher, although the longer-term trend suggests that downside pressure is present.
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