USDCAD breaks support, downside momentum increases

As expected, the USD continues to be sold on rallies across the board (with the exception of GBP). One of the largest moves was seen against the Canadian dollar.

The CAD appreciated significantly after last Friday’s great labor report. Unemployment decreased greatly from 8.7% to 8.4% and number of jobs increased by 30.6 thousand vs. exp. 4.9 thousand confirming improving fundamentals.

Selling pressure was sufficient to break a trendline support at around 1.0450 and reached a low 1.0409. After a short period of consolidation the pair broke below the psychologically important 1.04 level and reached 1.0317 today. Daily chart shows a strong momentum to the downside and unless we break up and close around 1.04 (in which case the price would form a hammer formation) today’s close will be another huge bearish candle pointing to additional USDCAD weakness (CAD strength).

Placing a sell stop below today’s low at around 1.0310 with 1.0350 stop and 1.0240 limit looks like a good strategy to take advantage of the strong bearish momentum.