Friday’s ETF Chart To Watch: CurrencyShares Canadian Dollar Trust (FXC)

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Stocks nudged lower on Thursday as sour economic news welcomed profit-taking pressures on Wall Street. Lackluster performance results from Sprint Nextel (S) and Akamai Technologies (AKAM) weighed on excitement levels, while worse-than-expected weekly jobless claims data only added to the list of worries. Selling pressures were also fueled by comments from European Central Bank President Draghi, who noted that the recent strengthening of the euro could hamper economic recovery in the region [Download 101 ETF Lessons Every Financial Advisor Should Learn].

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Contrarian Picks

With no major economic releases taking place on the homefront today, investors will likely turn their attention to the north ahead of the opening bell as Canadian employment data hits the Street. As such, our spotlight will focus on the Rydex CurrencyShares Canadian Dollar Trust (FXC, A), which may experience volatile trading as investors re-adjust their positions in the currency market following the latest labor market figures. Analysts are expecting Canada’s unemployment rate to come in at 7.2%, which would mark a slight deterioration from last moth’s reading of 7.1% [see also 17 ETFs For Day Traders].

Chart Analysis

After kicking off 2013 with a solid gain this Canadian dollar ETF appeared to be well on its way to resuming its uptrend, which started on June 4, 2012. However, once FXC slipped below our outlined trading channel (blue lines) on January 23, 2013, selling pressures quickly accelerated as key stop-loss levels were triggered, sinking this ETF back below its 200-day moving average (yellow line). Although FXC was quick to rebound, this ETF is still struggling to regain its footing above the 200-day moving average, which may suggest further downside in the coming weeks  [see How To Swing Trade ETFs].

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FXC

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FXC does have major support around the $99 level, which makes entering into a long position at current levels fairly lucrative; however, we advise conservative investors to hold off from buying in until this ETF establishes definitive support at or above $100 a share [see also How To use A Breakout Trading Strategy For ETFs].

Outlook

If the latest employment report paints a worrisome outlook for Canada’s labor market, FXC could be in for a rough trading session; in terms of downside, this ETF has major support around $99 a share followed by the $96 level. On the other hand, better-than-expected employment data may ignite a rally for the Canadian loonie in the currency market; in terms of upside, this ETF has immediate resistance at the $100 level followed by $101 a share. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.

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Disclosure: No positions at time of writing.

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