After a rally to the level of 1.2795 from the lows of 1.2451, the USD/CAD pair dropped for the third day in a row finding support at the 200 EMA.
On the other hand, the US dollar was affected by lower expectations of a 50-basis point increase in interest rates by the Fed in March.
This uncertainty and additionally the rise in the price of crude oil gave strength to the Lonnie to fall below 4/8 of Murray.
The surveyor, Automatic Data Processing (ADP) reported this Wednesday that US private sector employment decreased by -301,000 in January against market expectations of an addition of +187,000 jobs compared to 776,000 previously.
If the Non-Farm Payrolls data to be published this Friday confirms this negative data, the dollar could weaken further and USD/CAD could fall below 1.2650.
According to the 4-hour chart, we can see the formation of a bullish pennant pattern. A break above 1.2720 could confirm the upside move with targets towards 1.2817. The pair could jump as high as the psychological level of 1.30.
Conversely, a close below the area of 1.2650 and below the 200 EMA on the daily chart could see a correction to the 3/8 Murray around 1.2573. The trading instrument could hit the strong support at 1.2451.
On January 27, the eagle indicator reached the extreme overbought zone around 95-points. The downtrend is likely to continue, however, we should wait for a confirmation of a break below the 200 EMA.
Our trading plan for the next few hours is to wait for a break above 1.27 to buy or a confirmation of a break below the 200 EMA at 1.2650 to sell.
Support and Resistance Levels for February 3 - 4, 2022
Resistance (3) 1.2817
Resistance (2) 1.2727
Resistance (1) 1.2705
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Support (1) 1.2639
Support (2) 1.2614
Support (3) 1.2573
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Scenario
Timeframe H4
Recommendation: buy above
Entry Point 1.2695
Take Profit 1.2817
Stop Loss 12642
Murray Levels 1.2451 (2/8) 1.2573 (3/8) 1.2695 (4/8) 1.2817 (5/8)
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