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Anyone gutsy enough to take a countertrend trade?

Here’s the USD/CAD setup I’m watching ahead of Canada’s employment report today.

USD/CAD: 4-hour

USD/CAD 4-hour Forex Chart

USD/CAD 4-hour Forex Chart

This pair has been cruising inside an ascending trend channel connecting its higher lows and higher highs over the past couple of months.

Another test of resistance is taking place, and it looks like the ceiling might hold again. See that tiny double top pattern right there?

A break below the neckline support around the 1.3100 major psychological level could be enough to confirm that a selloff is in the cards.

This could take USD/CAD back down to the nearby support levels around the mid-channel area of interest (1.3000-1.3050) or the very bottom of the channel (1.2850-1.2900).

Stochastic still has some room to move south but is already closing in on the oversold region to reflect exhaustion among sellers. Turning back up might mean that buyers are back in the game.

In that case, USD/CAD might find some buyers at the 100 SMA dynamic inflection point and go for another test of the channel top. The 100 SMA is above the 200 SMA to suggest that the path of least resistance is to the upside.

This could all boil down to the outcome of the Canadian jobs report, which is slated to show a 15K rebound in hiring after the earlier 30.6K decline. Earlier on, the Ivey PMI release revealed a significant improvement in the employment index for August, hinting at an upside jobs surprise.

If that happens, the Loonie might be poised for more gains across the board, as this could encourage traders to price in yet another 0.75% BOC interest rate hike.

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