USDCAD Approaching Support But Price Action Still Bearish

Summary:

USDCAD bearish move contineus but bulls prepare to step in as it approaches support. Here is a trading plan to use in the case a reversal comes.

Few currency pairs reflected the USD weakness like the USDCAD did in the last weeks. The pair evolves in a tight, bearish channel, with little or no pullbacks – the ideal trading environment for bears.

However, it approaches support levels not seen since before the coronavirus pandemic. As this is the NFP week, the Canadian employment numbers come out at the same time with the NFP. As always, the USDCAD is one of the most difficult currency pairs to trade on simultaneously released employment data out of the United States and Canada.

Canadian Data to Consider This Week

The week ahead is full of relevant Canadian data to consider. Tomorrow traders have the pleasure of seeing the Manufacturing PMI, followed by the crude oil inventories a day later. Oil is a wild card when trading the Canadian Dollar due to the Canadian economy being energy-intensive.

Thursday’s Canadian Trade Balance will tell us the resilience, if any, of the Canadian economy. But the focus remains on the all-important employment data on Friday.

When trading the USDCAD pair, one cannot ignore the U.S. data. The economic calendar is full this week, as the ISM Manufacturing and Non-Manufacturing surveys will offer traders clues about the NFP. Speaking of the NFP, the ADP on Wednesday is a good previous of what to expect a couple of days later.

USDCAD Technical Analysis

If there is a week with the potential to bring a change in such a strong trend like the one seen in the USDCAD pair, this is it. The pair approaches important support and a bounce might be in the cards. However, going long without “proof of life” is risky.

Therefore, bears should keep trailing stops the more the pair declines. Bulls, instead, may want to see the price breaking out of the channel before going long. Therefore, consider placing a pending buy stop order at 1.3240 with a stop loss at 1.31 and a target to reflect a minimum risk-reward ratio of 1:2.