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Fan Yang

USD/CAD Closed the Week with a Bearish Engulfing Candle

Last Friday (5/5) we saw official jobs data from both the governments of the US and Canada. The US Non-Farm Payroll report showed a decent turnaround in April after a dismal reading in March. The Canadian employment change however underwhelmed. 

US NFP:
April: 211K
Forecast: 194K
Previous: 79K (revised from 98K)

Canadian Employment Change:
April: 3.5K
Forecast: 20.0K
Previous: 19.4K

While the US data seems to have fared better, I think neither jobs data changes the overall assessment of the economy by respective central banks. Overall, the Fed is more hawkish than the Bank of Canada, which lends upwards pressure for the USD/CAD. Recently, we saw the USD/CAD break above a consolidation resistance. But we should now expect some pullback after Friday's bearish engulfing candle.

USD/CAD Daily Chart

(click to enlarge)

Anticipating Support:
- As I noted earlier, I think there is upwards pressure on the USD/CAD, and this has already manifested into a bullish breakout as we can see on the daily chart.
- The bearish engulfing candle on Friday was strong, basically erasing all the gains from last week.
- Such a rejection after usually pivotal jobs data on Friday suggests we should anticipate at least some further downside extension after Friday's dip.
- However, since the overall pressure is still bullish, we should anticipate support.
- I think 1.34-1.35 is a large area that should provide support. There is a previous support and resistance pivot in this area. 
- Furthermore, if price drops to this area, there should be a rising speedline to support it. 
- Finally, look for the RSI to hold above 40. This would reflect maintenance of the prevailing bullish momentum. 
- A break below 1.34 would shelve my bullish outlook, which has upside potential towards 1.40 this year. 

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