USD/CAD a Bear in Sheep's Clothing
Updated
The pair has had quite the week. Since January 2, the Canadian Dollar has been the best performing currency in the world. This comes even with the report of soft economic data on Friday. What surprised me the most was the fact that US non-farm payrolls crushed all expectations, yet the USD still weakened against the CAD. My only explanation is that there was a risk-on mood yesterday, as equities rallied amid the strong US data and news of potential US-China trade talks.
The pair has now sunk below its channel support line from October. It will require further monitoring to see whether it reverts back to its trend or a new trend is forming. On January 1, I had written that the pair should break above 1.36440 before initiating a buy position, due to the resistance that was forming around that level. It never got above there in the new year, and that resistance seems to be the point of reversal in the most recent up-trend. I would advise a wait and see approach now, given that this down-trend may continue, and a new support has not yet formed.
The pair has now sunk below its channel support line from October. It will require further monitoring to see whether it reverts back to its trend or a new trend is forming. On January 1, I had written that the pair should break above 1.36440 before initiating a buy position, due to the resistance that was forming around that level. It never got above there in the new year, and that resistance seems to be the point of reversal in the most recent up-trend. I would advise a wait and see approach now, given that this down-trend may continue, and a new support has not yet formed.
Note
The down trend continues! I would still avoid initiating a position on the pair given that a clear trend has not yet materialized.Note
Sorry, I should amend the above comment: I would wait until the next consolidation or slow down in the drop before initiating a new position. The pair is clearly in a down trend over the last week!
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