USD/CAD Breakout Watch: Traders Brace for NFP as Bulls Target 1.4154 Next
USD/CAD moved upwards during the early US session on Thursday, coming close to 1.4060 as traders were leaning on the US dollar.
Quick overview
- USD/CAD rose towards 1.4060 as traders favored the US dollar ahead of a crucial jobs report.
- The Canadian dollar weakened due to lower oil prices, impacting its demand in the market.
- Expectations for the upcoming non-farm payrolls report suggest 50,000 new jobs, with the unemployment rate holding at 4.3%.
- Technical analysis indicates USD/CAD is testing a symmetrical triangle, with potential bullish or bearish outcomes based on key price levels.
USD/CAD moved upwards during the early US session on Thursday, coming close to 1.4060 as traders were leaning on the US dollar ahead of a highly anticipated jobs report. The movement in currency pairs reflects two factors working in the dollar’s favor at present: fading expectations that the Fed will cut rates in December, and a weaker Canadian dollar dragged down by lower oil prices.
Markets are keeping a close eye on the US government shutdown after it pushed back the September non-farm payrolls report, adding extra significance to this release. With loads of traders viewing it as a clear clue about what the Federal Reserve will do next, positioning in dollar pairs has been more sensitive than usual.
NFP Expectations Shape Market Mindset
The US Bureau of Labor Statistics is expected to say that 50,000 new jobs are on the way and that the unemployment rate will stay at 4.3%. A soft reading could get people talking again about rate cuts earlier in the year, but right now, the markets are the other way.
The CME FedWatch tool shows the probability of a December rate cut has tumbled right down to 33% from 63% just a week ago.
That change helped push the US Dollar Index up to the 100.30 region – its highest level in nearly 5 months – giving USD/CAD a bit of extra support to push higher.
Oil weakness hits CAD
Crude oil slipped after word got out that a possible US deal to ease tensions in Ukraine might be on the table. Since the Canadian dollar is super sensitive to its energy exports, a drop in oil prices normally means softer demand for the CAD. This remains a problem for the CAD, tipping the balance in favour of a strong USD in the short term.
Things to keep an eye on in the coming sessions include:
- NFP employment & wage data
- Any updates on what the Fed is planning
- Movement in crude oil prices
- Any releases from the Canadian macro side of things
USD/CAD Technical Setup: Bulls at the Gate
USD/CAD is now testing the top of a symmetrical triangle, a pattern that has been shaping the pair’s behavior since October. Price has bounced back cleanly from the 1.3988 low, and we’re starting to see higher lows, which is often the first sign that a market is getting ready to expand.
The pair has reclaimed the 20-EMA, and the price action suggests a firm upward trend. RSI is above 60, indicating good momentum without suggesting it’s running out of steam yet. The next major test will be the 1.4065-1.4095 zone, where the triangle’s upper trend line and previous swing highs meet up.
A break above 1.4095 could see USD/CAD push on to 1.4126, then 1.4154 (a level from earlier supply). If it fails, we’re looking at a potential drop to 1.4042 and down into 1.4017 if the momentum falters.
Trade Opportunity: Let Price Tell You Who’s Winning
For starters, the easiest way to play this is just to wait for a confirmation before jumping in – don’t try to anticipate it.
A bullish move is confirmed if USD/CAD closes above 1.4095 with a strong bullish candle. Good targets are 1.4126 and then 1.4154.
A bearish setup will form if price rejects the top and closes below 1.4042 – then we’re looking at a potential drop to 1.4017, and a worse breakdown all the way down to 1.3988 if it gets going.
It’s getting tight in there, and triangles never stay quiet for long. The next big candle determines the path into next week.
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