The USD/CAD currency pair had a strong showing on Thursday as the market continues to hover around the 0.98 handle. This area has been fairly congestive lately, and as such I think we will continue to bounce around within the immediate vicinity. However, I do see a couple of areas that will be very important to the future of this market.
For starters, I think the 0.9950 level will be one of the more important ones that this market could visit in the near-term. This is an area that would prove to me that all vestiges of resistance have been blown through, and that we would be going much higher. In fact, I think the 1.04 level would be a reasonable target.
The 1.04 level is important to me because it was the top of the previous consolidation area, an area that I believe we could very easily return to if this market continues to form what looks like a solid base or even an ascending triangle at this point. This could be the beginning of a serious pullback in the overall downtrend, and this is something that I would plan on taking advantage of.
Oil markets
Naturally, there is the possibility that we go lower and I am fully aware of this. In fact, it would be easier to start selling this pair if we get below the 0.97 level. The oil markets will be one of the biggest influences on this currency pair as usual, and as such I think that a trader will have to pay attention to both that market, and this one simultaneously.
The downtrend is significant, and is a long-term one. Because of this, I think that if we do break lower we could see prices as low as 0.95 in relatively short order. However, this pair does have a long history of going sideways for significant amounts of time. This is because the two economies are so interconnected, and of course that won't change. So, having said that if you choose to trade this pair you have to be willing to accept the fact that it will sometimes take much longer than you want to get to your target.