With employment updates coming soon from both Canada and the U.S., this ranging pattern on USD/CAD may quickly turn into trend in no time.
USD/CAD Consolidation Breakout Ahead?
On the four hour chart above, we can see USD/CAD traders have been in snooze mode throughout the month of May as major catalysts have been lacking for the forex market over the past few weeks.
That may change very soon, especially for USD/CAD as we’ll soon get employment situation updates from both the U.S. and Canada to hopefully get this pair moving.
Expectation for the U.S. report are for an improvement over the disappointing 266K net job adds/tick higher in unemployment rate to 6.1% in April. As for Canada, analysts say we’ll see a much lower job losses number of around 23.5K in May than the 207K job loss in April read.
If that scenario plays out, we may see a bump higher in USD/CAD into the weekend. But what we’re looking out for are reads that could lead to a strong directional move, i.e., a big gap in performance between the two countries jobs numbers.
If the U.S. hugely disappoints while Canada surprises positively big time, then we’ll be on the look out for a downside break of the range and a possible continuation of the longer-term strong trend lower.
And vice versa, if Canada hugely disappoints while the U.S. surprises positively, that may lead to an upside break of the consolidation pattern. But given the longer-term trend favoring the Loonie, we’d be looking at more of a shorter-term trade as counter trend moves tend to fizzle out quickly.
Given the current themes of pandemic recovery (COVID-19 cases hit lowest point in U.S. since pandemic began) and rising oil prices (It could be a hot summer ahead for oil prices), the odds are that a pop higher would have trouble extending into a bullish trend would be pretty tough. A rally would likely be used as a shorting opportunity for longer-term players if these current themes continue to hold.
What do you guys think? Will the upcoming jobs updates spark a breakout for USD/CAD?
Let me know in the comments below, and as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.
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