It's set to be a big day tomorrow for the Canadian dollar as talks continue to ramp up that NAFTA will all be sorted fairly shortly, and these comments come from both sides for a change. The Canadian Prime Minister seems confident that Canada will get a good deal and as a result the CAD has been strengthening across the board. Many analysts have been saying that the Canadian dollar has not been getting enough love and I certainly agree as of late, but the market may be holding back until it can see the NAFTA agreement and the final outcome before pricing things in. On top of this US non-farm payrolls are due out tomorrow and are likely to be quite volatile, so USDCAD traders will be looking for a weaker figure to move lower, to fully confirm the head and shoulders pattern we've seen forming.
The key neck level for the USDCAD can be found at 1.2807 and is acting as key resistance for bullish movements upwards. If there was a bullish breakthrough, then I would expect the next level above this at 1.2923 to be the key target for bulls. Any push through this level is unlikely in the short term as the 1.2923 has historically been a very strong resistance level. If the bears continue to run the pattern then I would expect a serious test of the support level at 1.2681. I would also expect some support at the 200 day moving average to appear, but we could see some serious profit taking around this level if we do extend lower.
One of the surprise movers is the NZD, which after two very solid bullish days has seen some serious retracement from resistance at 0.7323.The NZD in general has shown strong periods of consolidation and a lack of trending recently, but there is a bearish trend line forming in the long run higher up that markets are likely to focus on if the bulls do crank things up and go a little higher.
For me the focus is a bit more on the bearish side of things, as at present the recent retracement from today shows to me that the bulls are not keen to push things to far, and each wave has got weaker and weaker. The key support levels here for me are the 200 day moving average, which is acting as dynamic support, while also strong support levels at 0.7171 and 0.7054. Both of which strike me as ideal targets in the current market climate for bearish traders. I've also added in a potential trend line for the future, but it's quite steep and they tend not to hold up under serious pressure.