The US Dollar (USD) extended upside movement against the Canadian Dollar (CAD) on Tuesday, increasing the price of USD/CAD to more 1.0670. The sentiment however remains bearish due to Lower Low and Lower High in the recent wave.
As of this writing, the pair is being traded near 1.0673. A support can be noted around 1.0631, the intraday low of yesterday ahead of 1.0620, the swing low of the recent correction wave as demonstrated in the following chart. A break and daily closing below the 1.0620 support area could spur a deeper correction, opening doors for a dip below the 1.0600 handle in the long run.
On the upside, the pair is likely to face a hurdle near 1.0728, the 50% fib level ahead of 1.0856, the 38.2% fib level and then 1.0960, the swing high of the recent upside rally. The sentiment will remain bearish as far as the 1.0960 resistance area is intact.
Tomorrow i.e. on Wednesday the Federal Reserve is scheduled to release the minutes from the recent monetary policy meeting. The comments from the Federal Open Market Committee (FOMC) policymakers regarding the first rate hike could incite high volatility in the price of USD/CAD. A surprise increase in the nonfarm payrolls and unexpected fall in the unemployment rate has already fueled speculations that the central bank could revise its forward guidance stance and consider earlier than expected increase in the benchmark interest rate.
Considering the overall technical and fundamental outlook, buying the pair around the current levels could be a good strategy, the trade must however be stopped out on a daily closing below the 1.0620-1.0600 support area as described above. It is always suggested to use proper risk and reward ratio in forex trading.