The USDCAD pair has been pulling back for a week now, unable to sustain any move above 1.41. This is the second time it's been knocked out from this zone since early November, thus forming a classic double top on the daily chart. Now that the price has broken the neckline at 1.40, sellers have a clear runway down to their next target at 1.393—the threshold where the whole pattern started. To seal the deal and truly invalidate the broader uptrend, they need to push it down to 1.386.
Technical indicators aren't offering any relief for the bulls. The RSI has been stuck in the 40–60 range for two weeks now, and the MACD is on the verge of slipping into negative territory for the first time since July. Anyone long on CAD should keep their stick on the ice to defend the 50-day moving average and the 1.40 level. If quotes climb back to 1.405, it is probably the green light to bail on short positions.
All eyes are now on Friday's Canadian jobs report, as it could be the key catalyst for market volatility to come into play. The last two releases, on October 10 and November 7, blew past expectations and gave the loonie a solid boost. This time, however, forecasts are rather gloomy—predicting an uptick in unemployment from 6.9% to 7% and a loss of between 5,000 and 7,600 jobs. When expectations are that low, it's easier for the actual data to surprise markets.
The big date on the calendar is December 10, when both the Federal Reserve (Fed) and the Bank of Canada (BoC) are scheduled to hold a meeting. The American regulator is all but certain (a 90% chance) to reduce borrowing costs again, while its northern neighbor is likely to stand pat. The rate gap between them is currently sitting at 175 basis points, though analysts at Rabobank see it narrowing to just 75 points next year. If this forecast holds water, USDCAD could be trading in the 1.36–1.37 range before long.
The following trading strategy is on the table:
Sell USDCAD at the current price. Take profit 1: 1.393. Take profit 2: 1.386. Stop loss: 1.405.
This content is for informational purposes only and is not intended to be investing advice.
