By: Christopher Lewis
The USD/CAD pair is one of the choppiest of the major pairs. The market is often a real struggle between oil prices, the American employment situation, the building industry in the US, and commodity prices. Because of this, it is one of the most frustrating for people that I know in the Forex markets.
However, the pair gets a bad rap in my opinion. The fact is that the pair consolidates quite a bit, and as long as you are comfortable with range trading, you should be quite fine in this market. However, it often requires that you zoom out on the charts so you can see some kind of clear signal. It is exactly this point that should be stressed when looking at this pair currently, as at first glance it would be easy to get suckered into a trade that hasn’t proved itself yet.
Break Down or Fake Out?
The last couple of sessions have been pretty rocky for this pair. One of the biggest problems is that the bottom of the recent consolidation area has been broken to the downside, yet the pair wouldn’t fall afterwards. Why is this? It is because of the fact that the bottom of the rectangle is sitting above a zone, not a support line. Because of this, I am waiting for a break below the true support level. In my opinion, it is the 0.98 level as many of the significant levels will be found on the round numbers like the 0.98 handle.
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The trend is most certainly to the downside, and I don’t want to buy at this point. Granted, a bounce could happen off of the 0.98 handle, and that would make some sense. But with the recent action, I know I much prefer to sell so that is what I am going to do. I would sell this pair on a daily close below the 0.98 level, or perhaps on rallies that show signs of weakness such as a shooting star of large red candle in general. Also, if we bounce high enough, I would be more than willing to sell from the parity level too.