The US dollar is approaching a three-year low against the Canadian dollar as the boom in commodities, particularly oil helps to strengthen the Canadian currency on the foreign exchange market.
Oil prices have been on the rise this week as the easing of lockdowns in the US and parts of Europe boosted market optimism that oil demand is going to rise during the summer months. Markets are hoping that strong demand from western nations could help rising COVID-19 cases in India and Japan.
Traders now look to the release of the Canadian jobs report for the month of April today. The employment report could shed some light on the Bank of Canada’s next move after the central bank decided to taper at their last meeting.
Expectations are that the Canadian economy will shed over 100,000 jobs, and that the unemployment rate is going to rise to 7.8 percent. The USDCAD pair faces as double whammy today, as the US Non-farm payrolls job report is released at the same time.
If we see the US economy far outpacing the Canadian economy in the employment reports, we could see some reprieve in the USDCAD downtrend. However, rising oil prices could slow down any potential rebound.
Something we are seeing now is record amount of positive sentiment towards the USDCAD pair amongst retail participants. According to the ActivTrades market sentiment a staggering 96 percent of traders are bullish towards the USDCAD pair.
Something else of note is that bulls have consistently been on the wrong side of the market during the decline in the USDCAD pair over recent weeks and months. This extreme one-way sentiment skew remains a warning of further heavy downside ahead for the USDCAD pair.
USDCAD Short-Term Technical Analysis
The four-hour time frame shows that a bearish head and shoulders pattern has formed, following the recent heavy rejection from the 1.2350 resistance area this week.
According to the overall size of the bearish price pattern, the USDCAD pair could be about to drop towards the 1.2150 support area. Watch out for further losses in the USDCAD pair if the price holds beneath neckline support, around 1.2260.
See real-time quotes provided by our partner.
USDCAD Medium-Term Technical Analysis
Looking at the daily time chart, the USDCAD pair remains trapped inside a large falling price channel between the 1.2640 and 1.2000 level. The channel is declining, so the bottom trendline of the channel continues to fall.
I suspect that bears are more than likely going to test towards the bottom of the channel. Therefore, we should expect a coming move towards the 1.2000 price area before any type of bounce takes place.
See real-time quotes provided by our partner.
