By: DailyForex.com
The USD/CAD pair attempted to rally during the session on Monday, but found the 0.98 handle as being far too resistive to stay positive for the session. The Friday hammer sets up a nice sell signal if we can get below it, as the bounce from roughly 0.9725 shows support. Obviously, if we get below that support we could go much lower.
The overall trend in this pair is most decidedly to the downside, so I am much more comfortable selling than buying. However, it must be said that if we get above the 0.9950 level that buying would be the only thing we can do because of an obvious breach of resistance.
The oil markets will continue to push this market around, and as such it makes sense that as oil gets more expensive, the Canadian dollar should continue to rise which of course pushes this pair down. If we break the bottom of the hammer from Friday, it is very likely that light sweet crude markets will have risen back above the $90 level. If that's the case, this pair should continue to grind lower.
New Lows?
If we break the bottom of the hammer from Friday, I fully expect this pair to grind lower and make a fresh below. The 0.9625 level should eventually be tested and broken as the market continues to punish the US dollar. This makes sense of course as the Federal Reserve continues to print money and expand the monetary easing policy that the United States is currently on.
Oil has been under pressure due to lack of global demand, but there is always the possibility of a headline out of the Middle East that will send prices straight back up. This of course can happen at any point time, and as such will have the markets on adage as sudden moves can appear out of nowhere. I do believe that the US dollar will continue to lose value against the Canadian dollar, not only because of the oil markets, but the fact that the Canadian economy is doing so well. Just last week, we saw the Canadians and 54,000 jobs. While that doesn't sound like much, you must keep in mind that Canada has 1/10 of the population that the United States does. In other words, this would've been the same as the United States adding 540,000 jobs. Canada is doing quite well, and as such I do expect that eventually the pair will continue its path lower.