Large swings in the equity markets have been the recipe of the day recently, as they swung lower on the back of political tensions in the US markets. However, the market saw some positive light as ADP payroll lifted to 241K (210K exp), which was well above what was expected by the market. As a result equity markets have been slightly more upbeat as of late, however the bearish trend has still looked to be the dominate player in the market at present. One other thing that that has been dragging on additionally has been the NAFTA agreement which many had hoped to finish this week, but now looks like it may drag on a little longer, but has provided a positive momentum as of late.  

As a result of the equity markets have so far pulled back above the 200 day moving average on the back of this bullish movement. However, I am overly cautious in this sort of market as resistance looks to be tight at 2664 as of late, and has the potential to fall lower to if the technical's come into play. Any break out above this is likely to also meet stiff resistance at the 100 day moving average above this level which is acting as dynamic resistance at present. Any bearish movements lower will hit 2628 and 2579 as support levels, with the 200 day moving average still the major player in this scenario between the bulls and the bears.

As mentioned yesterday the USDCAD continues to be a major player in the current market climate, as it looks to drift lower on the back of USD weakness, and Canadian economic data which so far has been robust and honest. Previous movements in favour of the CAD have been helped by strengthening oil markets, but that is less so the case in recent times as oil markets have been relatively bullish compared to the CAD. Which begs the question, how powerful is the correlation these days between the two pairs. Well for now it seems further mute, but it warrants further investigation based of the wildish movements we have seen in the USD.

All in all the USDCAD has been a technical powerhouse, and there is further movement to go to reach some sort of consensus at this stage. So far the USDCAD head and shoulders pattern looks to be in full swing and is drifting lower at a steady pace. The market is likely to continue this pattern in the short term until the USD can take full control and the potential target of 1.2681 as support looks like a key target for traders.

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