USD/CAD remains range bound despite disappointing news

Reports from the US disappointed today. The US Trade Balance posted a larger than expected deficit of -42.3B, up from -39.3B in January. Unemployment Claims, at 326K, also exceeded the expected figure of 319K. Meanwhile Canada’s merchandise exports grew, resulting in a trade surplus of $290 million in February.

Technical Analysis

USD/CAD has formed a triangle formation this week, with tight boundaries compared to the recent swings. Even so, the pair has managed to respect the boundaries on each touch, with the support trendline being tested on four separate occasions.

The pair lacked any major reactions early in the US session, as traders are waiting in anticipation of tomorrow’s US NFP report and Canadian Unemployment Rate.

The main support is the round handle 1.1000, also coinciding with 38.2% Fibonacci retracement on the December-March uptrend. The current trend configuration remains bearish, since price broke below the last swing low from March and stabilized below the 200 Simple Moving Average on 4H timeframe.

A break below 1.1000 will lead to a sell-off towards 0.9093-0.9118, where February’s low and the 50% Fibonacci retracement form a decent support confluence.

Bullish breaks of the triangle are unlikely at this point, but it this will happen the 50-Day Moving Average and 200 SMA on 4H, sitting between 1.1080 and 1.1090, should be noted as potential reversal points.

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Prepared by Alexandru Z., Chief Currency Strategist at Capital Trust Markets