USD/CAD Forex Technical Analysis – Ready to Test 1.2969

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The Canadian dollar is trading sharply higher against its U.S. counterpart on Friday as commodity prices rose, led by strong gains in gold and crude oil, and after a senior Bank official of Canada (BoC) left the door open for another outsized interest rate hike. The move comes ahead of key reports on employment trends and the unemployment rate.

At 08:49 GMT, USD/CAD is trading at 1.2995, down 0.0094 or -0.72%. On Thursday, the Invesco CurrencyShares Canadian Dollar Trust ETF (FXC) settled at $74.64, up $0.10 or +0.13%.

More Aggressive BoC Rate Hikes Ahead

The Bank of Canada continues to view early rate hikes as the best way to combat the highest inflation in nearly four decades, Senior Deputy Governor Carolyn Rogers said, a day after the central bank raised its benchmark interest rate to a 14-year high of 3.25%.

Canada’s central bank has tightened by 300 basis points since the start of 2022, more than other central banks overseeing a G10 currency, including the Federal Reserve, according to Reuters.

Rising Gold and Crude Underpin the Loonie

Rising prices for gold and crude oil, two key exports from Canada, helped boost the commodity-linked Canadian dollar on Friday. Gold is trading at $18.90 and Crude Oil is up 1.45%.

Look forward…

At 12:30 GMT, USD/CAD traders will have the opportunity to react to the latest reports on employment developments and the unemployment rate.

The jobs report is expected to show the economy added 15,000 new jobs in August, much better than the previously reported loss of 30,600 jobs in July. The unemployment rate is expected to rise from 4.9% to 5.0%.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, the momentum has been trending lower since the confirmation of the closing price reversal high on September 7th.

A trade through 1.2895 will change the main downtrend. A move to 1.3209 will negate the closing price reversal top and signal a resumption of the uptrend.

The minor range is 1.2895 to 1.3209. USD/CAD is trading on the weak side of its pivot at 1.3052, making it resistance.

The short-term range is 1.2728 to 1.3209. Its retracement zone at 1.2969 to 1.2912 is the next downside target.

The main range is 1.2518 to 1.3224. Its retracement zone from 1.2871 to 1.2788 is a major support and a zone of value.

Daily Swing Chart Technical Forecast

Traders’ reaction to the minor pivot at 1.3052 should determine USD/CAD’s direction on Friday.

Bearish scenario

A sustained move below 1.3052 will indicate the presence of sellers. If this creates enough bearish momentum, look for a break in the short-term 50% level at 1.2969.

We could see the bulls back on the first test of 1.2969, but if it fails, expect selling to eventually extend to the Fibonacci level at 1.2912. This is the last potential support before the main low at 1.2895.

Bullish scenario

A sustained move above 1.3052 will signal the presence of buyers. If this generates enough bullish momentum, look for a push towards a minor pivot at 1.3098. Exceeding this level could extend the rally into the resistance band at 1.3209 to 1.3224.

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