With today being nonfarm payroll Friday, we can expect a lot of volatility in the currency markets for a brief time period as the Americans make their announcement. Leading up to this, it will more than likely be very quiet in many of the currency pairs that you watch. This will be especially true in the USD/CAD pair, as it is highly influenced by the economic conditions of the United States, and as a result will be the one to watch after the economic announcement comes out.
Canada sends 85% of its exports into the United States. This is why the pair tends to have a negative correlation to the employment situation in the United States when these announcements come out. After all, if you are largest customer doesn't have a job, they won't be buying much from you will they? It is because of this that a poor nonfarm payroll number since his pair higher, and money into the US dollar. Although it is counterintuitive, if you think of it from the export position of the Canadians, it makes quite a bit more sense.
Consolidation, can it be broken?
We currently have consolidation between the 0.99 handle, and the parity level. There are a few little blips of noise here and there, but these are the two handles the market seems to be paying the most attention to currently.
I feel that if the 1.0050 level gets broken to the upside, this pair could trend much higher and aim for the 1.04 resistance barrier. This would more than likely be because of a poor jobs number out of the United States, but even more importantly bad news concerning the fiscal cliff talks going on in Washington DC.
Alternately, if we managed to break down below the 0.9875 level, I feel that this pair will continue much lower and aim for at least the 0.97 handle. This would be predicated upon good news, which of course should drive up demand for Canadian goods such as crude oil. However, until this announcement comes out I would expect very little movement in this pair at all.
