The USD/CAD pair fell during the session on Wednesday, something that I had anticipated when the Monday shooting star was printed. Tuesday saw the market rent a hammer, so this of course throws a lot of confusion into the marketplace. Looking at the candle for the session on Wednesday though, it appears that the sellers are starting to get a bit of a leg up on the buyers.
I suggested that the market would look for support down near the 1.04 level, and it appears that we could very well see that relatively soon. In fact, I believe that's very healthy and is exactly what I've been waiting for. After all, the market has been fairly parabolic lately, and as a result a little bit of a rest and a pullback to collect more buyers makes complete sense.
Don't forget the oil markets
You have to make sure to pay attention to the oil markets as well, as they are such a heavy influence on the value of the Canadian dollar. As oil looks to continue its volatility, it may spell out further volatility for the Canadian dollar, but I think that ultimately this market will go higher, and oil should go lower at the same time.
The US numbers have been a bit stronger than Canada, so you do have that working for a higher USD/CAD rate as well. On top of that, it appears that the Federal Reserve is looking to exit out of the quantitative easing game, while the Canadians are still in the middle of their easing cycle. However, the Canadian economy is without a doubt highly leveraged to the American one, so any negative effects of easing will more than likely last for just a short amount of time when it comes all things Canada related.
The 1.04 level is just the beginning of support in my opinion. I also think that the area goes all the way down to the 1.03 level, suggesting that somewhere in that vicinity of supportive candle is an invitation to start buying. As for selling, I have no interest in doing it.
