By: DailyForex.com
The USD/CAD pair ended up gaining for the session on Friday after initially falling through the 0.98 handle. This is significant as it shows the 0.98 handle as being potential support, and this would of course have to be true in order for the recent bullishness to continue. Nonetheless, there are obstacles above that I think this market will struggle with as the buyers trying to pick up the pace.
As most of you know, the Canadian dollar is heavily influenced by the oil markets. As a side note, the light sweet crude markets formed a beautiful hammer based at the $90 level this past week which suggests that the oil markets may get a bit of a bid this coming week.
If this is the case, the Canadian dollar should gain against the US dollar. However, I see the 0.98 level as a significant support area that needs to be overcome. If this pair can fall below the 0.9750 level in concert with a rise in oil prices, I think we could see a significant fall. After all, the previous consolidation which had support at the 0.98 level was 600 pips tall. This of course would suggest that a move lower could see this pair fall as low as the 0.92 handle.
Buyers face serious resistance.
On the upside, if this pair continues higher we will have to get above the 0.9950 level. It isn't until we get to that point that this pair can be safely considered "rebounding." This would have the market looking to move back into the previous consolidation area which has a top at the 1.04 level. Because of this, if we do manage to close above the 0.9950 level on a daily close, I am not only buying this pair, but buying it for a move all the way up to the before mentioned 1.04 area.
No matter what happens, you will have to keep an eye on the light sweet crude market. If that market suddenly gets strong, it will only be a matter time before this one falls. Of course this correlation works in both directions.