USD/CAD tests key support levels, what’s next?

USD/CAD tests key support levels, what’s next?

The pair is testing the 100-hour MA currently

USD/CAD slips to a session low of 1.2894 now following the earlier
news that a NAFTA deal may be in the works over the next two weeks.

That has seen the pair fall below the 100-hour MA (red line) in a test towards the downside. Sitting nearby is the 200-hour MA (blue line) at 1.2889, so that will provide additional support for the pair in the meantime.

The case with all NAFTA news over the past few weeks is that it comes out in the Asian session and there is a minor nudge, and then comes a follow through move in European trading. So, that could provide the impetus for the pair to head lower.

However, the bigger picture is one that provides a much clearer view of the pair. Over the past one-and-a-half weeks, it is still consolidating between the March lows near 1.2820 and the 50.0 retracement level @ 1.2928.

The battleground for traders now is to weigh between the risk-off sentiment from the selloff in equities and the optimism surrounding a reported push by Trump for a NAFTA deal. A break on either side of the consolidation range will tell you who wins out, and that will be the next trade in the pair.

But don’t forget there’s also data risk later in the week for the loonie and the dollar with both countries’ jobs report due on Friday.

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