The USD/CAD pair rose and cleared the 1.03 level on Thursday as the resistance finally gave way. The oil markets continue to look weak, and as a result of this CAD is hurting. This should continue as there is no real support for oil at the present level, and the resistance area breaking is a serious change of momentum.
However, today’s Non-Farm Payroll number will more than likely have a large effect on this pair as well. Typically, if the jobs number is strong in America, this pair will sell off as there is an implied demand for oil from Canada. If the number is weak, this normally has a detrimental effect on oil markets, and in turn has a positive effect on this pair. Because of this, the USD/CAD pair is one of our favorites on Non-Farm Payroll Fridays.
The pair has recently broken out above the 1.01 level to become bullish all of the sudden. The 1.03 level was the first major resistance area to overcome, and as it has we have a bullish bias now. If the pair falls, we think that the 1.01 to parity area should provide support for a potential buy in this market as well. The breaking of the Thursday candle to the upside will simply show a continuation of the bullish momentum.
The 1.05 level above will more than likely invite some kind of reaction as the area is a “large round number.” However, the area isn’t a major one, and this should give way eventually as well. The 1.10 level is a major area, and this may be where we end up if the economic situation truly gets worse in the next few months. Because of this, we still have a bullish bias as long as we can stay above the parity level.
A break above the parity would be a massive reversal that we couldn’t ignore. At that point we would have to be sellers, but this seems fairly unlikely as the problems with the global economy continue, especially in the European Union.