USD/CAD has been one of the least exciting pairs to trade lately. However, this can be one of the best kinds of markets to trade. Have you ever looked at a chart and said, “If I only sold here, and bought here over and over, I would have cleaned up”, and then wondered how you can get that “lucky?” Well, this is the market for you if you like ranges. (You should, markets range far more than they trend.)
The Canadian dollar is often used as a proxy for oil. The Light Sweet Crude markets have done something very interesting over the last three sessions, and it is because of this that the pair has caught my eye again. The Light Sweet Crude markets have produced three daily hammers in a row at the $95 level, an area that I have identified as massive in its implementations for the future of the contract.
Coincidence? Probably not.
The oil market forming a hammer at a massive support level is worth noticing. For those of you that don’t trade oil – it is one of the most technical markets out there. The fact that three in a row have formed is very massive in its implications. While this in itself isn’t a reason to trade the USD/CAD pair, the fact that the USD/CAD has formed a shooting star at the parity level certainly is. When you add the price action in the USD/CAD and the Light Sweet Crude together, you have a cross-market confluence that astute traders will pay attention to.
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The 200 day exponential moving average is just below the parity level as well, so this will continue to play a part in the direction of this pair as well. The parity level is the start of the massive resistance area that in my mind extends all the way to 1.01, and I think that the shooting star is placed in just about as perfect of a spot as possible. On a break of the bottom of the Wednesday lows, I am short of this pair and aiming for somewhere near 0.98 as a target.