Recall that USDCAD moved sharply higher on Friday after a stronger US jobs report and a weaker Canadian jobs report. The contrast favored the US dollar, and the price action followed. Buyers took the pair above its 100-period moving average on the 4-hour chart, currently at 1.40289, and its 100-day moving average at 1.40423.
The momentum carried the price through the 1.4068–1.4081 swing area, above the 200-period moving average on the 4-hour chart at 1.41209, and past 1.41297, the low of the next swing area. The move ultimately reached 1.4139.
Sellers had their shot. Buyers stepped back in.
Broad US dollar selling early today gave back some of Friday’s gains. USDCAD slipped below the 38.2% retracement of the move up from the August low at 1.40828 and reached 1.4078, inside the 1.4068–1.4081 swing area. That is where buyers stepped back in. The rebound has taken the price back above the 200-period moving average and up to Friday’s high near 1.4139.
What next for buyers?
A break above 1.4139 would have traders looking toward 1.41532, the high of the swing area that starts at 1.41297. Get and stay above 1.41532, and the next upside target is the 1.4192–1.4204 swing area.
On the downside, the 200-period moving average at 1.41209 is the close risk level. If the price gets back below it and starts to trade comfortably there, it would take some of the steam out of the rebound. Traders would then look back toward the 38.2% retracement at 1.40828 and the swing area just below it.
The trading lesson
Friday’s high tells traders whether buyers can extend the move. The moving average tells them where the rebound starts to lose traction. Keeping those two levels separate gives buyers a nearby level to lean against while they wait to see if the next break can hold.
