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USDCAD Setup Hinges on Canadian Employment Data

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On Monday I released commentary about the bullish inside bar that had formed on the USDCAD daily time frame. So far this setup has worked out beautifully, hitting our first target at 1.2800 on March 11th. This level is represented by the January 30th high, but more importantly it marks a six-year high for the pair.

Since hitting our first target, the pair has been consolidating and holding above the 1.2662 key level. Our second target is at 1.3000, but it’s unclear at the moment whether or not the market has enough bullish momentum to make it there.

This is where tomorrow’s event risk comes into play. On tap at 8:30am EST is USD PPI, but more importantly for USDCAD is the Canadian employment figures. These two events combined should certainly be enough to trigger a move one way or the other.

For those currently in this trade, it’s probably prudent to trail your stop up to protect your capital or book whatever profits are on the table. Just know that if you trail your stop loss, there’s a good chance of being taken out during the increase in volatility tomorrow.

For those not in this trade, you can watch for a daily close above 1.2800. This would be a significant break as it would mark a new six-year high for the pair. A daily close above this level would likely trigger a move to the next level of resistance at 1.3000.

Just be sure to wait until the week closes before considering an entry. I am in no way advocating actively trading ahead of major news events.

Summary: If tomorrow’s events should trigger a close above 1.2800, wait until next week to look for a long entry on a retest of 1.2800 as new support. Key resistance comes in at 1.3000. A close below 1.2662 would invalidate the current rally and could produce a move back to 1.2565.

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