The USD/CAD pair fell during the session on Wednesday, but found enough support in order to bounce back and form a hammer. This hammer sits on top of a large cluster of noise just below, and therefore I think this market is ready to make a serious challenge to the 1.05 level, an area that it failed at earlier in the session. I think that the level will eventually get broken to the upside, and that we will eventually test the 1.06 handle. Above there, things get truly interesting as this market would find in air pocket that it could exploit all the way up to the 1.10 level.
That being said, I also look at short-term pullbacks as possible buying opportunities for a market that has obviously broken out to the upside. I think a break of the 1.04 level was indeed a "shot across the bow" for Canadian dollar buyers. At this point time, they have to be on the back foot and oil doesn't necessarily look like it's going to support the Canadian dollar anytime soon as well. With that being the case, it's very possible this pair may continue to grind higher.
Know the behavior of this pair.
Knowing the behavior of this pair, I believe that the market will more than likely grind sideways with a slightly upward bias, and then eventually explode to the upside. That might actually be the break of the 1.06 handle it I'm thinking going to happen, as his pair does tend to cut and grind for a while, and then find serious momentum in one direction or the other. This happens when you have two interconnected economies like we have here between Canada and the United States, and as a result the trading can be a bit difficult at times. Nonetheless, I do think that the writing is on the wall, and that the Canadian dollar is in some trouble. I don't necessarily think that there's going to be some kind of massive melt up, but certainly I am still bullish overall.
