NAFTA negotiations are coming to a head this week, and USD/CAD trading has been winding its coil tight. After two months of volatility this currency has settled into a tight range trade. Bulls see a base forming, and Bears see a plateau. This is the pause for the cause period as NAFTA negotiations rise to the forefront. Until there is clarity as to what changes will be made to NAFTA no significant breakout is expected. Fundamental and technical traders alike will have a struggle as the USD/CAD maintains a flat line. Like it or not this market is focused on the trade relations between the U.S. and Canada.
Between 1.2898 and 1.2829 it will be a pillow fight as the USD/CAD drifts along. Since NAFTA negotiations are expected to peak this week volatility is most likely going to return. The last two months have seen this currency swing all over the place, and strength looks to be on the Bears side. Trading under 1.2829 has this market looking South as it targets the 1.2759 Support level. A bounce here may be short lived though. A failure at 1.2759 signals a solid Bearish slide is in motion. 1.2673 is the extended downside objective, and a Critical Pivot. If the currency can generate a break back into this lower territory then it will be likely followed by more longer term Bearish sell offs locking the trend intact.
The upside prognosis is tuff. A sustained trade above 1.2898 may be enough for the Bulls to make a play for higher levels. 1.2997 is the level to shoot for any fresh buying that can lift this market up. USD/CAD Bulls may run into a wall at the 1.2997 price. If the market pierces 1.2997 all bets are off for the Bears. A breach of 1.2997 is a strong Bullish signal that the overall trend is back in Bull mode. At this point any Break will most likely become a buying opportunity as the USD/CAD begins to make higher move Highs and higher move Lows.
Above 1.2997 the currency will be aiming for the 1.3100 Resistance level. If NAFTA talks end in a manner that is Bullish for the USD/CAD then a very strong long term Bullish trend may be at its very beginning stage. It will be interesting to see what type of volatility will hit this market over the coming weeks ahead.