Since mid summer, the USDCAD pair has been trading in a roughly 400-pip range with a slight tilt to the upside. The slope angle is so gradual that the chart formation looks more like a range than an ascending channel.

In either case, the technicals are clear as a result of this formation. Support is firmly around 1.25 (broader area defined as 1.2450 - 1.26), while resistance is around 1.30 (broader area defined as 1.2850 - 1.30).

With USDCAD now close to the lower end of this range, it makes sense to look for bullish tactical setups. That can come from shorter-term charts, where the price has already bounced as a first sign of the support holding. The risk:reward is attractive from current levels also, even if we assume a minimum target toward the 1.27 area.

The daily chart below shows the bounce with Tuesday’s candle almost closing as a doji. This is a good sign that buying pressures are active here. Yesterday’s candle closed near the lows, but the price is reacting again today.

Entries (two ways): 

• 1st way: Look to enter around current levels (1.2540), or if possible lower (in this way, you ensure that you won’t miss the potential upside move)
• 2nd way: Place a buy limit order at 1.2473. As noted above, it is the final endpoint of the support zone, and there is a possibility it will be reached on volatile price action. (in this way, your risk is very small as the stop is just below the entry, but you may miss the entry as the price may not go as low)
• Finally, you could split your entry between the two approaches. You can enter half of the position before the NFP and jobs releases, and then set the other half on a limit order at 1.2473.

Stop: 

• Below the strong support at 1.2480. 
• Below 1.2470 should be a good exact number which should hold. If USDCAD breaks below all those support levels, then our setup has failed.

Targets:

• 1st target - 1.2680 (big near-term Fib confluence ressitnace)
• 2nd target - 1.2775 high from September 29
• 3rd target - 1.29

The jobs reports from both the US and Canada will be released later today, at the same time (8:30 ET, 14:30 CET). This means there can be a big volatility spike on USDCAD, even much more than on other USD pairs because Canadian employment reports are also known to be very volatile.

But volatility could also mean opportunity. Our entry is very close to the support area, which means if we are wrong, the risk is small. The expectations are positive for both US and Canada’s reports, so it would be tough to make a call. Ultimately, it’s hard to imagine USDCAD breaking below this strong band of support in the 1.25 area if the dollar remains strong. And if the NFP is robust, the dollar should remain broadly strong.

Obviously, the best scenario is if NFP beats expectations while Canadian jobs miss. In that case, USDCAD will probably shoot higher. But the opposite can easily happen also. Only in this case, the big 1.25 support area, the broadly strong dollar, and a mildly risk-off tone in markets should provide some buying pressures in USDCAD that should cushion a possible downside reaction to today’s reports. And finally, keep that 1.2473 support level of the 100% Fib extension in mind.

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