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Canadian dollar extends gradual recovery thanks to trade balance

USD/CAD almost made it to the very round level of 1.10, but its fate changed in the US session, with the strong trade balance.

On the hourly chart, it  already looks like more than a correction but rather a significant change of direction. However, there still is a long way for the loonie to recover and it in the bigger scheme of things it could just be the necessary  correction on the way to 1.10.

Canada posted a surprisingly strong deficit of C$1.9 billion for the month of June, contrary to expectations for a deficit of $C0.1 billion. In addition, May’s figure saw a significant revision: from a deficit of $C0.2 billion to a surprlus of $C0.6 billion.

While trade balance numbers are not key, these surprises were big enough to push the loonie higher, continuing the momentum that already began beforehand.

Here is how it looks on the chart (more follows):

Canadian dollar recovering August 6 2014 on trade balance surplus in Canada

USD/CAD continued falling from the 1.0985 peak all the way down to 1.0915 at the time of writing. Note that the pair didn’t crash following the  publication, but just accelerated its fall. The Canadian dollar showed us once again that it is a slow moving currency, often allowing traders to jump on the band wagon.

Support awaits at 1.0850, followed by 1.0780. While this move is impressive, there still is a long way on the downside for the pair, which traded with the 1.06 handle back in July. Resistance remains strong at 1.10. For more levels, see the Canadian dollar prediction.

So what will determine if this is a true recovery of the loonie or just a necessary correction on the way up?

The easy answer is Friday’s jobs report. A strong report could turn the fall of USD/CAD into an avalanche, and a mediocre report could allow another attack on 1.10.

Stay tuned for a preview of the Canadian jobs report.

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.