By: DailyForex.com
The USD/CAD pair went back and forth during the session on Thursday, essentially forming a neutral candle by the end of the day. However, the market bounced off of the recent support level, and as a result I feel that this market will continue to consolidate going into the future. However, as today is nonfarm payroll Friday, I believe that a move could happen based upon some type of shock information. Also, if this market breaks down, I believe that even that move would be enough to really get this market moving as there are plenty of support areas between here and 1.04 or so.
This market will have several different factors pushing and pulling the pair around, with both the oil market in the possibility of Federal Reserve tapering in the next month or two, it's possible that this pair will grind back and forth shortly. However, there are certain levels that I think that will signify some type of longer term trend being formed.
Intertwined economies
One of the strangest things about this pair is the fact that the Canadian dollar does better as the US economy does. However, when you need to understand is that the Canadian economy sends over 85% of its exports down to the United States, and because of that the Canadian dollar does better when the Americans can't afford to buy Canadian goods, such as oil and timber. In other words, the customer has to be doing fairly well for the store to be profitable.
Without a doubt, the nonfarm payroll number is one of the biggest signals as to how the American economy works, or doesn't at this moment. Because of this, I am going to sit out of this market for the rest of the day, but as soon as the markets print a daily candle, I could begin to ascertain as to which direction the market was getting ready go to, but I do believe alternately it will go higher. After all, there is a significant amount of support all the way down to the 1.04 handle, and because of that I will either buy this market on a break above the 1.06 handle, or even a pullback that shows signs of support down in those lower levels.
