Today provided USD/CAD which a much needed rally after being heavily sold for the past few weeks. After yesterday’s close below the 100-day Simple Moving Average, overbought conditions finally produced a rally after jobless claims for the week ended April 5th dropped to 300k from 332k, the best reading since May 2007.
The 4-week moving average for claims also improved to 316k, which will definitely help bolster employment forecasts for next month and could very assure that the Fed will continue with its tapering pace.
The daily chart highlights the tentative reversal for U.S. currency over its northern neighbor. The rebound may attract a move to the 38.2% Fibonacci retracement of the recent slide from the middle of last month. If price does rally towards 1.1017 level, sellers may return and eventually look to resume the corrective move possibly towards the 1.0750 level.
If we see price over the next week close below 1.1065 level, which is the 50-day SMA, we may see an upward continuation towards 1.12.
The trade: Buy USDCAD at 1.0910 with a stop loss at 1.0875 and a take profit at 1.1050. The Risk/Reward Ratio is 1:4
Edward J. Moya
WorldWideMarkets Online Trading