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Canadian Dollar Posed for Breakout, Although in Overbought Territory

by on July 3, 2014 6:25 pm BST
 

The Canadian dollar futures is poised for a breakout as price action buds against price resistance at .9400, after the loonie picked up demand after the US dollar momentum faded after today’s non-farm payrolls report. The US Labor Department data showed that 288,000 jobs were added in June. Mark Chandler, head of Canadian fixed-income at the Royal Bank of Canada, said that the positive jobs data would ultimately benefit Canada.

The Canadian dollar has seen a lot of demand this year, particularly in June, after inflation data exceeded the Bank of Canada’s two-percent target. Traders are looking for the Canadian central bank to address the increase in consumer prices during their mid-July policy statement, which could invoke some hawkishness.

Loonie futures will look to break .9400, and a close above this key round-number would provide steam to .9430/35. Price action is overbought on the daily chart, but prices should consolidate before the next leg higher. A pullback to .9370 would be an interesting opportunity for a continuation higher. The ADX is still indicating that the current move has strong momentum.

1D Chart of 6C

1D Chart of 6C