The USD/CAD pair initially rose during the session on Monday as traders came back from the extended weekend. However, we failed to hang onto gains over the course of the session, and as such formed a shooting star. This shooting star sits just above the 0.99 handle, which I have as significant support. This sets up an interesting situation going forward as we have not only resistive candles, but a supportive level all within the same vicinity.
The fact that the shooting stars of the bottom of a downdraft suggests that we could see an acceleration of the downtrend going forward. This continuation candle will often precede another leg down. With this being the case, the candlestick for Monday has caught my attention.
I believe that the support level goes down to roughly 0.9875, and it isn't until we break below there that I feel comfortable shorting. Quite often, oil will go hand-in-hand with the value the Canadian dollar, so watching the oil markets will be crucial as well. If oil starts to rise in value, this pair should by all accounts start falling.
Sideways
This pair likes to go sideways for long periods of time, so I am not going to try and jump the gun when it comes to shorting this pair. I will wait for a daily close below the 0.9875 level, and only then will I start selling. We also have to worry about the alternate situation as well, as we could see a spike higher in this pair if we get some type of bad economic news, or a headline that rattles the markets.
Although a break above the highs from the Monday session would be a very bullish sign, I am not interested in buying this pair until we get above the 1.0050 level, as that is a significant high that we've made recently. In the meantime, I think this market will continue to be very choppy, and judging by the way oil looks, it could be for some time. Going forward, I need to see a breakout of this consolidation area, and am aware the fact that this pair can go for long periods of time without making any significant moves, but when it finally does it tends to be very rapid.