Current trend

The USD/CAD pair is showing a slight decline, holding near 1.3820. Markets are gradually recovering from Monday's extremely volatile session. At the same time, despite the weakening of the American currency, the instrument managed to update the record highs of October 2022, partly because trading in Canada was not held due to a national holiday.

The reason for the active decline of the US dollar was the July report on the labor market, published last Friday, which reflected a decrease in Nonfarm Payrolls from 179.0 thousand to 114.0 thousand with a forecast of 175.0 thousand, as well as an increase in the Unemployment Rate from 4.1% to 4.3% and a slowdown in Average Hourly Earnings from 3.8% to 3.6%, while analysts expected 3.7%. In addition, traders noted a 3.3% drop in Factory Orders in June after –0.5% a month earlier, with preliminary estimates of –2.9%. Weak labor market data has raised confidence that the US Federal Reserve will ease monetary policy soon. The probability of a rate cut in September has increased to 80.0%, with many experts now suggesting that the rate could be adjusted by as much as 50 basis points.

Today at 14:30 (GMT 2), Canada will release June foreign trade statistics: the International Merchandise Trade is projected to increase from –1.93 billion dollars to –1.84 billion dollars, which is unlikely to provide significant support to the national currency. On Friday, investors will turn their attention to Canada's July labor market report, which is expected to show the Unemployment Rate holding steady at 6.4% and Average Hourly Wages at 5.6%.

Support and resistance

Bollinger Bands in D1 chart show moderate growth. The price range is narrowing, reflecting the emergence of ambiguous dynamics of trading in the ultra-short term. MACD reversed into a descending plane, having formed new sell signal (located below the signal line). Stochastic shows similar dynamics, but quickly approaches its lows, which weakly correlates with the real dynamics in the market.

Resistance levels: 1.3830, 1.3864, 1.3900, 1.3950.

Support levels: 1.3800, 1.3762, 1.3733, 1.3700.

Trading tips

Long positions can be opened after a breakout of 1.3830 with the target of 1.3900. Stop-loss — 1.3800. Implementation time: 2-3 days.

A rebound from 1.3830 as from resistance, followed by a breakdown of 1.3800 may become a signal for opening of new short positions with the target at 1.3733. Stop-loss — 1.3830.