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We’ve got a major event risk ahead from both the U.S. and Canada, which could determine the directional bias on USD/CAD for the next few weeks.

Here’s a quick technical setup to keep an eye on to get ready for different potential scenarios to play out.

USD/CAD Major Resistance to Hold?

USD/CAD Daily Forex Chart
USD/CAD Daily Forex Chart

Right before we hit the weekend, we’ll get the latest employment updates from both the U.S. and Canada during the Friday morning U.S. trading session. These are top tier events for their respective currencies, so the probability is relatively high that short-term volatility will pick up quickly.

Expectations are for both countries to show an improvement to the jobs environment, which would likely mean we may not see a directional spike right off the bat. So, what we’re looking for is a divergence from expectations, either U.S. disappoints and Canada shows growth, vice versa, to make this setup fundamentally legit. 

If we do see a divergence in employment trajectories that favors the U.S., then that makes the previous triple top on the daily chart above one to watch for a potential long positions. If the market can sustain a break above the 1.2900 – 1.2950 range, then that may draw in technical buyers, as well as broad risk sentiment players as the world leans risk-off during this Omicron variant uncertainty environment.

If the data shows a weakening U.S. jobs environment vs. an improving Canadian job environment, then traders may take the retest of that previous triple top as a good place to start fresh positions or take profits from the recent rally in USD/CAD from roughly 1.2300 to 1.2800 in November.

With a daily average true range of around 80 pips, if we see either of these data divergence scenarios play out, 1.2900 to the upside and 1.2700 to the downside are reasonable targets where the market may run into another block of limit orders. Something to consider when managing risk and setting exit orders.

What do you guys think? Is USD/CAD set to make new highs before the end of the year or is this a great time to consider a short position? 

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.

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.