USD/CAD Top?

USD/CAD Top?

USD/CAD Top?

After 10 straight days of gains, there’s finally a negative day for USD/CAD. Typically when USD/CAD reverses, it’s a multi-day affair and in this case, we believe that USD/CAD will fall to at least 1.36. Oil prices rebounded at the end of the week and Canadian yields turned higher – something we needed to see before USD/CAD lost momentum. If these trends keep up, this may be real top rather than a temporary pullback for pair. Data was mixed with stronger manufacturing (IVEY PMI) and trade activity offset by slower job growth. Only 3K jobs were created in the month of April and all of them were part time. The economy lost -31K full time jobs and added 34K part time jobs. Although the unemployment rate dropped to 6.5% its lowest level since October 2008, part of the improvement can be attributed to a lower participation rate.
There are no major Canadian economic reports released last week which means loonie traders need to keep an eye on oil to see if Friday’s rally is a true bottom.

Technically, resistance is at the latest high under 1.38 but we’d like to turn to the monthly chart to find support. The currency pair could bounce off 1.36 but the real level to watch is 1.3575, the 50% Fib of the January to May decline in 2016. Below that we have the more important 23.6% Fibonacci retracement of the 2011 to 2016 rally at 1.3430 as support.

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