A Bearish USDCAD Has The 1.19 Level In Sight
Impressive job numbers out of both the US and Canada made Friday trading a tad confusing on the USDCAD pair. The reason for this was due to both sets of data beating expectations. This meant that USDCAD traders didn’t know if they should go long or short.
In a predictable way for trading currency markets, the USDCAD pair took the previous lows, then made a swing to take the highs (and it almost managed to do that), only for sellers to step in again to push the pair down.
There is still a classic a and b move in terms of the Elliott Waves Theory. This means that a c wave should follow. However, the c wave in such a pattern is always an impulsive move and we should look for acceleration to the downside with 1.19 area in sight.
What could trigger such a move as the market is now sitting on the 1.2400 handle? What could be the reason for USDCAD to plunge so much?
One answer can come from the oil market, as the OPEC meeting ended last Friday and the outcome was the one everyone was looking for: members left the output at current levels and as a consequence oil prices jumped.
There is a well known the fact that oil and the USDCAD are inversely correlated, and the first reaction for the USDCAD was to move to the downside.
The OPEC announcement came before the jobs data was released so traders shrugged it off, at least for Friday’s trading.
In an impulsive move there are five different waves and these waves can all be corrective in this case, we’re talking about a terminal impulsive move or not, if a classical one is starting.
I would go with the second possibility and because the USDCAD is a leading currency pair, in the sense that it reacts first before other currency pairs follow, the third wave to the downside should prove juicy for bears and painful for bulls.
Next week we have housing data out of Canada, however if recent economic releases like the Ivey PMI that came above the 60(!!!) level and the impressive job numbers from Friday, then housing data should show the same, hence the CAD will have a lot of buyers.
This should translate into lower values for USDCAD, and just like that, the technical analysis picture described above is more than possible as recent increase in volatility is showing us that four hundred pips moves are not that rare anymore. Do you want further proof? Just look at recent stats for the EURUSD and USDJPY pairs.
When oil touched a low of about $26 per barrel in January, the Canadian dollar, which is a commodity
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