The USD/CAD has packed plenty of price action in the past few days of trading and volatility is likely to continue as ‘fair’ equilibrium is sought.

As of this writing the USD/CAD currency pair is near the 1.285750 mark.  On the 4^th of August the USD/CAD was trading near lows of 1.28200, coming within sight of support seen in the last week of July and but not coming anywhere near the low on the 1^st of August which touched 1.27675. On the 5^th of August the USD/CAD soared to nearly 1.29880, but then reversed lower before going into the weekend.

Monday’s move towards Lows may Raise Eyebrows of USD/CAD Speculators

Intriguingly yesterday’s trading in the USD/CAD also produced another selloff and the currency pair actually consolidated between 1.28480 and 1.28650 for a lot of the day. This morning’s trading has seen the USD/CAD essentially sustain these lower marks, which were last traded in a sincere way on the 4^th of August. The spike upwards on Friday via buying in the USD/CAD happened after the Average Hourly Earnings data showed an uptick in payroll spending, per my interpretation of Forex.

• Volatility continues to be a minefield in the USD/CAD for day traders, and risk management certainly is needed.
• The USD/CAD is testing lows seen on the 4^th of August, which may entice speculators who believe the currency pair is momentarily oversold.

The notion that the USD/CAD spiked higher on strong buying Friday, and then reversed lower may be seen as a pure technical move proving the Forex pair was overbought. However, some speculators may look at the current value of the USD/CAD as it traverses important support and suspect the currency pair may actually now be oversold. Choppy conditions are likely to be demonstrated in the coming days.  

If the USD/CAD starts to trade within a Narrow Range this may Prove Attractive

Traders who are cautious may want to see if current support levels can hold. If the USD/CAD can stay within the 1.28570 to 1.28600 zone for a time, this may prove to be a rather interesting ignition point to launch trades. However, day traders should probably look for quick hitting trades that are not overly ambitious.  The use of conservative leverage and a slightly wider stop loss, compared to a relatively close take profit target may prove to be worthwhile.

Consolidation may prove to be favorable in the near term as financial houses interpret the tea leafs from the U.S Federal Reserve. Traders looking to take advantage of support levels may want to place buying positions near support around the 1.28565 to 1.28550 vicinity to look for upside momentum.

Canadian Dollar Short-Term Outlook

Current Resistance: 1.28650

Current Support: 1.28555

High Target: 1.28970

Low Target: 1.28212

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I’m much more comfortable going short than trying to buy this pair which looks so negative at the moment.

• The EUR/USD pair went back and forth Friday as we continue to see a lot of noisy behavior.
• The 1.02 level is an area that a lot of people will pay attention to as a magnet for price.
• The euro has been back and forth during the course of the week or so, so I think it’s only a matter of time before we have to break in one direction or the other.

If we break above the 1.03 level, then it’s likely that we go looking to the upside. The 1.04 level is an area that has a lot of “market memory” built into it, and it’s likely that we will see sellers in that area. The 50-day EMA sits just above that area as well, so I think it’s worth paying close attention to ultimately, if we were to reach that area, I think the first signs of exhaustion would be a potential selling opportunity.

Shorting at 1.02

Markets pulling back from that area have a bit of real estate to cover, so I would be more than willing to get short. Ultimately, the 1.02 level could be a target. If we break it down below there, then it’s likely that the euro drops back down to the parity level. Speaking of breaking down, if we slice through the 1.01 level, it’s likely that we go down to the parity level as well.

The parity level is something worth paying close attention to, as it has a lot of psychology attached to it. If we can get a breakdown below the parity level, then a daily close underneath there would confirm a lot of selling pressure. At that point, it’s likely that we could go down to the 0.98 level, maybe even down to the 0.96 level. I do believe that the European Union has a whole host of issues to worry about, most of which the United States does not have to. Because of this, it is likely that we will see downward movement. The market has been sideways for a while, so I do believe that once we get that break out, it could be somewhat volatile and violent. Regardless, I’m much more comfortable going short than trying to buy this pair which looks so negative at the moment.

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