USD/CAD Rise Stalled on Weak NFP, Crude Oil Rebound
James Chen July 2, 2015 9:59 PM
<p>July 2, 2015 – USD/CAD has stalled and pulled back after reaching an 11-week high of 1.2632 in early trading on Thursday, surpassing June’s peak […]</p>
July 2, 2015 – USD/CAD has stalled and pulled back after reaching an 11-week high of 1.2632 in early trading on Thursday, surpassing June’s peak of 1.2562. This high follows a steep ascent over the past three days on general US dollar strengthening and sliding crude oil prices.
These conditions made somewhat of a turn on Thursday, as the worse-than-expected Non-Farm Payrolls data placed pressure on the US dollar, and crude oil made a significant rebound. The Canadian dollar has long had a relatively high positive correlation with crude oil, and often tends to rise against the US dollar when oil prices climb.
Overall, USD/CAD has continued to maintain the bullish trend that has been in place since late 2012, which began to accelerate its climb one year ago. This accelerated bullish trend is clearly defined by an uptrend support line extending back to the intermediate lows of July 2014. Currently running in very close proximity to this trend line is the key 200-day moving average, providing additional support to the trend.
The uptrend line has been tested and respected on multiple occasions, with the most recent test occurring in mid-June, when the currency pair dipped close to the trend line and 200-day average. On this dip, price action formed a clear hammer reversal candle on the daily chart and has subsequently been on a sharp rebound for the past two weeks.
Despite Thursday’s rebound in crude oil, the global over-supply conditions should persist, placing continued pressure on oil prices. In addition, while the US dollar pulled back on Thursday, the bullish trend for the greenback continues to be well-supported.
For USD/CAD, any resumption of the entrenched short-term uptrend, within the context of the longer-term uptrend, has a clear upside target around the major 1.2800 resistance objective, the area of the six-year highs that were reached in March.
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