The USD/CAD pair tried to rally during the session on Friday, but as you can see ran into trouble above the 1.05 handle. This move was turned back around and ended up forming a nasty looking shooting star at the top of the recent consolidation area. The shooting star of course signifies weakness, but I don't feel that this market going to melt down by any stretch of imagination, rather it will signify that the market is ready to bounce back into the recent trading range.
The 1.04 level has been massively supportive, so we feel that this market should continue to go higher over the longer term, but a pullback to that area is highly likely based upon the shape of that candle, and the fact that this pair does tend to go sideways for long periods of time before making impulsive moves.
Interconnected economies cause choppy markets.
Interconnected economies such as the relationship between Canada and the United States causes this type of choppy market, but what it does do is open up massively parabolic moves from time to time. I believe that is what were about to see, and the fact that this shooting star formed simply shows that we need to build more momentum to breakout to the upside. If we can get above the 1.06 level, I see nothing but empty space between that level, and the 1.10 level. That would open up a nice parabolic move just waiting to happen, and ultimately that will happen in my opinion. However, I do recognize the fact that we may have to pull back a couple of times in order to build up enough momentum to breakout above that significantly resistant area.
Oil markets of course have a major effect on this pair, so keep an eye on that as well. Oil markets to look quite a bit to the soft side at the moment, so as oil falls, this will put more and more pressure on the Canadian dollar, driving this pair higher. Also, pay attention to the jobs number out United States, as it could drive money into the US dollar as well.
