The USD/CAD pair initially fell during the session on Wednesday, but bounced off of the 1.11 handle in order to form a hammer. This hammer of course suggests that the market is going to continue going higher, and as a result we feel that this market will more than likely test the 1.12 handle for resistance yet again. Breaking above that level since the market looking for the 1.15 handle, which of course is a large major number. With that, I would expect to see the market sell off a little bit from there, and I don’t necessarily expect to see the market shoot straight up to that number.
I still think that the 1.10 level should be the “floor” in this market, and because of that I think that any significant pullback should be a buying opportunity in this pair. After all, the Canadian dollar has been in trouble for some time now, and the oil markets certainly are not giving it any help. Although we did show a little bit of support in the light sweet crude market, quite frankly it hasn’t been enough to move the Canadian currency much these past few days.
Looking forward, expect lots of volatility as per usual in this market.
This pair typically will grind sideways, frustrate traders, and then eventually shooting in one direction or the other with an impulsive move. Because of that, it is one that a lot of traders will step away from, but it’s simply one that you have to be patient with. If you are patient enough, this pair can be quite profitable in short bursts.
Currently, the Canadian economy is tied to the US economy, and as a result it’s difficult to garner which direction the market may ultimately go, but right now I believe that we are in an upward bias. With that, I am only buying this market on dips using short-term charts, and have not interested in selling until we get well below the 1.10 handle, something that I don’t expect to see anytime soon.
