By: Christopher Lewis
The USD/CAD pair is one that loves to grind sideways for long periods of time. This market will often find itself going sideways for weeks on end, and then suddenly shoot straight up or fall relentlessly. This market is one that a lot of my friends aren’t found of, but I find the fact that it is often in a range to be one of its biggest advantages personally.
The action over the last couple of weeks has been choppy, and with all of the concerns about the global economy slowing down, this of course would have adverse effects on commodities overall, and the oil markets in particular. As you know, Canada exports mass amounts of oil to the world, and as a result we have a situation where if people think that the demand for oil is going to fall, the price of the Loonie will adjust accordingly.
Shooting star and the 200 day EMA
The action on Monday saw the pair repeat the same pattern it has several times over since the start of the year: A piercing of the parity level, only to fall back below it by the end of the session. The Pair has been doing this a lot lately, and even with the multiple attempts, has only managed this by a few pips each time. The fact is that the parity level is simply far too strong at the moment.
.png "USD/CAD Daily 41712")
The 200 day EMA is just above, and in fact repelled price yet again during the Monday session, and we managed to close below parity as a result – yet again. The action was of course bearish and classical so. However, the pair has seen higher lows lately, and it seems as if there is a real challenge going on at the moment. Because of this, I think this could be the most dangerous pair out there at the moment. Because of this, I am going to use the larger areas to define my next move such as the 1.01 level for resistance. I see the parity level as an area going all the way up to that mark, and as a result simply will not buy this pair until we close above it on a daily chart. As for selling, I need to see a sub-0.98 level close in order to sell this pair now. While I can see an argument for scalping, I see far too many other pairs out there that aren’t as cloudy at the moment. However, I would be very impressed on a break above 1.01 as we have seen so much downward pressure.