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USD/CAD Daily Outlook Jan. 24, 2012

By Christopher Lewis
Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.

By: Christopher Lewis

USD/CAD has been a tricky pair to trade lately as the oil markets have been rocked back and forth by the Iranian drama. With the European Union finance ministers approving an embargo on Iranian oil imports, the markets rose during the Monday session. It should be noted however that the act doesn’t come into play until July 1. With that being said, it doesn’t mean much – there are plenty of things that could happen between now and then.

The USD/CAD always is at least somewhat influenced by the price of oil, and the Canadians export so much of it. The price of oil rises and more people need to buy Canadian dollars as an extension. (At least it means that the demand is higher – so it only follows that the demand for the Loonie should increase as a general rule.) Knowing this, the drama in the Persian Gulf has been a real headache for traders in both the oil pits and Canadian dollar.

The pair can often grind for some time, and then will release to have explosive moves. The pair is essentially tied together as the two economies are so intertwined. Because of this, it tends to be a little less smooth than other pairs. It certainly hasn’t been anything close to being smooth over the last several weeks.


Triangle

The pair has finally come up with a clear pattern though. Not all is lost as far as being a technical analyst in the market with this pair. Through the continued grinding to the downside recently, we have finally formed a clear descending triangle in this pair. Interestingly enough, the bottom of the triangle is at the parity level.

The breaking below that level on a daily close would signal a breakdown of the triangle. The triangle measures 5 handles, (500 pips) and would suggest that the pair could go down to the 0.95 level by the time that move is over. I will be short of this pair if that happens on a daily close, but I am also aware of the fact that this pair tends to grind, so patience is needed. On a break of the triangle downtrend line, I would be long and aiming for the top of the triangle at 1.05 or so.

USD/CAD Daily Outlook Jan. 24, 2012

Christopher Lewis
Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.

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