USD/CAD bounces off a crucial horizontal resistance

The first Friday of the month is usually very busy for the USD but also for the CAD. Friday’s usually the day we have job data from both those markets and they do definitely shake up the charts. This Friday was better for the American currency as the NFP and unemployment rate were both better than expected. In Canada the unemployment rate dropped but the change was actually negative, a lot further below expectations. After that, it was a no brainer for traders which direction to choose, and the USDCAD ended on monthly highs.

Monday brings us quite a big correction, which you may find surprising because there isn’t a huge fundamental explanation for that. There doesn’t have to be, because not every move on the chart has to be explained by the data/events or statements. Sometimes it’s just pure consensus between demand and supply based on one of the technical factors, in this case – a horizontal resistance on the 1.295 (lower green). This level has been important since December last year and traders respected it once more, just like that.

Today’s bounce is part of something bigger though. The price is currently creating a right shoulder of a big H&S pattern (yellow). The formation isn’t active yet as the neckline (red) is intact. The price breaking the neckline will be a real, mid-term sell signal, but that’s still a hypothesis, for now.

In my opinion, the sentiment on USDCAD will remain negative as long as the price stays below 1.295 or even 1.308 (upper green), which has gained some importance over the last few months. The target for the next few weeks is the black up trendline, and chances that we’ll get there are quite high.