USDCAD Technical Analysis September 5th 2014

The Canada Ivey PMI came in weaker than expected at 50.9 vs 55.3 estimate and 54.1 last month. This index can be quite volatile (low of 46.9, high of 57.2 in 2014). So there is that caveat to consider.

Earlier today the Canada employment statistics were also weaker at -11.0K net change in employment. The part time workers shed -8.7K and full time workers lost -2.3K. Not so great. The expectations was for a gain of 10K. The Unemployment report remained steady at 7.0%.

Counter balancing the Canadian fundamentals is the weaker US employment report today which showed a net job gain of only 142K (estimate of 230K). Not so great there too.

So overall both contributors to the value of the USDCAD did not have great days from a fundamental perspective.

So what is the USDCAD price action saying?

Technical Analysis: USDCAD   is wedged between the 200 day MA (green line) and 100 day MA (blue line) on the daily chart.

Technical Analysis: USDCAD is wedged between the 200 day MA (green line) and 100 day MA (blue line) on the daily chart.

The price action today in the USDCAD has shown the volatility that one might expect from the fundamental backdrop. The initial move after the weaker employment reports, focused on the US dollar. So the price moved sharply lower. In fact, the price moved below the 100 day moving average at the 1.08552 level (blue line in the chart below). That move was quickly retraced however.

The subsequent rally saw the price of the USDCAD extend to and briefly through the 200 day moving average (green line in the chart below). That break was also short-lived and the price has since dipped.

So on a day when the expectations were leaning toward a break from between “the rock and the hard place” as defined by the 100 and 200 day MAs (see preview video at https://www.forexlive.com/blog/2014/09/04/usdcad-stuck-between-a-rock-and-a-hard-place-before-employment-reports/), we seemed to wedge ourselves tighter in the crevice. It might be time to cut off a limb and set up free soon.

Before going to such an extreme, exercise some patience. Eventually a break will be made and there will be a move away from the confining areas.

Looking at the hourly chart below, the 50% of the move up from last Friday’s low comes in at he 1.08757 level today. Discounting the fall after the employment reports at 8:30 AM ET, the price has been finding support against the levels. If the this level is able to hold, a break above the highs, and technical levels including the 200 and 100 hour MA (green and blue line in the hourly chart below) and 200 day MA (at 1.08912) can be expected. Staying above those levels will then be eyed for confirmation of the bullish bias.

If the price falls below the 1.0875 level (50% line in the chart below) The sellers are likely to kick in and test that 100 day MA again.

Technical Analysis: USDCAD holding above the 50% at 1.08757 level.

Technical Analysis: USDCAD holding above the 50% at 1.08757 level.

The battle between the buyers and sellers continues. Who will win?