USDCAD Big Selloff and Analysis
by: Colibri Trader
I have been doing my regular Sunday research and analysis and my attention stopped on the USDCAD pair.
I remember watching it in Friday just before the jobs report came out. Price was flirting with a major resistance area at 1.2900 and I was asking myself the question if it will break out or reverse.
The jobs report came out and Canadian jobs gained jumped by 79.5%. The unemployment rate fell below 6 and now it stands at 5.9%. The GDP report was also positive and it all boded well for the Canadian economy.
How did this reflect on the USDCAD?
USDCAD dropped more than 200 pips. It is a pretty phenomenal drop and it also coincided with the resistance level at 1.2900.
Pure coincidence or a price action confirmation, traders on both sides of the technical and fundamental approach are seeing the bearish implications.
What is to follow?
From here, I am seeing two possible scenarios.
Price continues the fall sharply and reaches for the next support level at 1.2425.
Price retraces back to around 1.2800 and then continues its fall towards the next support level.
A third scenario is also possible where price retraces back to where it fell from. Although a very likely scenario based on the economic data, it is something we should not exclude from questioning, since every scenario is as good as the next one.
What I am waiting for…
I am waiting for a retracement back to the 1.2750 area and then I will be looking for a price rejection and a bearish signal.
I believe that after such a quick drop we are bound to see at least a small correction before the bearish move is reignited.
The daily price action candle is a very strong bearish engulfing. The last 4 days of bullish candles are engulfed by a single red candle. From a weekly chart perspective, this gives us a very strong bearish rejection candle.
All in all, the negative bias is reaffirmed and this big USDCAD selloff is definitely going to have major implications in the following sessions to come.
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