USDCAD Bulls Hold Firm Ahead of Key Event Risk

The bulls are no stranger to USDCAD. The pair has enjoyed a massive 3,000 pip rally that has lasted for almost four years now.

After a failed attempt at a break above the 1.2800 key level in late January, the pair found itself ranging between 1.2380 and 1.2800 for more than two months. This came to a volatile end on April 15th when the bears managed a close 90 pips below range support.

Since that time USDCAD has spent its time digesting a large portion of the gains made since the beginning of the year. However that may be about to change.

The 1.2000 level can be seen influencing price action all the way back to 2008. More recently the level acted as resistance in January of this year, limiting the pair’s gains for five straight days.

The market now finds itself hovering above the intersection of the 1.2000 horizontal level and trend line support from September of 2014, a level that has been tested several times since its inception.

With the broader bullish trend still intact and the pair forming a bullish pin bar at a confluent support area, a move higher from current levels is probable.

How high could it go?

That’s anyone’s guess, but the 1.2380 area makes for a prime target. This area previously acted as support between late January and mid April and is also the 50% retracement from the March high to the April and May low.

Note: Keep in mind that we have NFPs and Canadian employment figures tomorrow at 8:30am EST – expect increased volatility during this time.

Summary: Opportunity to buy yesterday’s bullish pin bar above the key 1.2000 handle. A daily close below this level would invalidate the setup. Key resistance comes in at 1.2380.