What's next for USD/CAD

USD/CAD is up more than a full cent on the day. The trigger was a soft trade balance report from Canada along with a general bid in the US dollar.

Equally likely is that there is some position squaring ahead of Friday's dual reports on Canadian and US jobs.

Technically, there is now a decent amount of room on either side of USD/CAD. To the upside, the main level to watch is the Aug 31 high of 1.2763 but that's 90 pips away. Nearby is the closing high on Aug 30 at 1.2621 but I don't see that as a particularly tough level to break.

On the downside, there's the previous high this week at 1.2536, which is now support. Again, I don't see that as a genuine line in the sand.

The real story here is momentum, and it's to the upside despite a solid gain in oil prices today. The next chapter is likely to be written by economic data, particularly the Canadian jobs report on Friday. Seeing the outside impact of trade balance numbers, my guess is the market would be much more sensitive to a miss (i.e. if jobs are soft, USD/CAD will rise more than the opposite). That could mean a test of the Aug 31 in short order.