By: DailyForex.com
The USD/CAD pair rose above the all-important 0.98 level on Wednesday, and even managed to close toward the highs for the session. This of course is very bullish, but there is still a lot of resistance above at the moment. In fact, we managed to close just under a 100 pip high wall of resistance.
The next 100 pips will be crucial, as the 0.9950 level looks important from a seller’s point of view. The area would open the way for a run much higher, and would be convincing of a bullish market as the buyers would have broke through two important milestones in such a short amount of time.
The level would certainly open the door to the parity level. This is just a blip on the radar though, as the parity level becomes less and less important as we continue to cross over and below it. The area simply doesn’t carry the weight it once did.
Oil is going to be crucial
Oil is probably the biggest fundamental driver of the Canadian economy. The normal correlation has this pair falling with the rise of this important commodity. The market seems to be hesitant to break the oil markets down too far, and as a result this resistance area above may just hold. This would allow the pair to slip back under the 0.98 level, and this would of course be a very bearish turn of events as it would have the breakout over the 0.98 handle being a “false breakout.”
If the 0.9950 level does get broken, I will be waiting to see if the daily candle can close above that area. This would be the easiest way to confirm that we did in fact breakout, and if we did…I would be buying as the move would signify that the 0.98 level has held as support.
The 0.98 level is the bottom of the massive consolidation area between 1.04 and 0.98, and as a result would have me holding onto the long position for some time if I did indeed find myself in that position. Of course, selling below the 0.98 level is easier – it is simply a continuation of the overall trend.