I’m really looking forward to a busier week in the currency market. We should see a fair amount of liquidity return to the market this week, and perhaps we’ll see the rise of some meaningful moves soon. This first trading week of 2017 has just whetted my appetite for profit, and I can’t wait to pan out the pips in the week to come. I hope you’re just as excited about trading the markets this week!

Friday saw the US Dollar bulls smile, with the Dollar’s positive reaction to the US employment data. The Buck strengthened against all the major currencies, with the Canadian Dollar losing the least and the Japanese Yen the most.

USD/CAD – The Tough Canadian Dollar

The Canadian Dollar has been pushing back the US Dollar for quite a number of days. This recent decline in the USD/CAD has been pretty aggressive, and the Buck only managed to gain a dreadful 11 pips against the Canadian Dollar on Friday. Here is a daily chart of the pair:

USD/CAD Daily Chart

In the chart above, you can see that the pair failed to break through the red resistance zone a few days ago.

Personally, I was expecting the pair to trade higher and clear this zone. In currency trading, we need to be unemotional in our decision making, and not get too attached to a certain side of the market. I liked the long side of this pair a while ago, but at the moment the bullish opportunities on this pair are fairly limited.

Perhaps this pair could move into a range from here, with a former resistance zone which could provide support in the days and weeks to come. You’ll see what I mean on the following chart:

USD/CAD Daily Chart

The price action on this pair is a bit messy, but the current levels could easily entice the bulls to step in with some buying power. I would personally not enter long at the current market price. It would be wise to observe how this pair reacts at this former resistance zone first.

If we get a good reversal candle as an entry signal, for example, it would greatly increase our chances of success. When a currency pair declines so aggressively like the USD/CAD did over the last couple of days, we need to be careful not to enter before we see a really reliable price action signal.

Although the US Dollar could gain much against the Canadian Dollar soon, there are other currencies which are much weaker than the Canadian Dollar. One such currency is the Japanese Yen. Let’s see how the Dollar performed against this currency on Friday:

USD/JPY – Back above the 20-EMA

As you know, the USD/JPY has been in an extremely aggressive uptrend lately. Since July last year, the pair climbed almost 2000 pips.

However, the pair entered a consolidation zone in the last few weeks, followed by a sudden dip lower on Thursday last week. Let’s look at a daily chart of the pair:

USD/JPY Daily Chart

Although the Dollar gained tremendously against the Japanese Yen on Friday, the pair is still rather exposed to the downside. However, if we see some follow through of Friday’s Dollar strength, the bulls could possibly manage to push the pair to new highs soon. On the other hand, if this pair breaks below the 20-day exponential moving average and manages to close below it, a deeper correction could come into play.

If the pair manages to close another 100 pips plus higher in the next few days, this would re-establish its bullish bias.

Economic Data

The most important news event this week will probably be the US Retail Sales numbers on Friday at 13:30 GMT.

We also have retail sales figures out of Australia on Tuesday at 00:30 GMT.

All the best, and good luck!