The USD/CAD pair initially fell during the session on Monday, but bounced enough to form a little bit of a hammer. What I find most interesting is that the 1.10 level continues to offer support, and thereby making it even more significant in my opinion. Because of this, I feel that this market is in fact going to go higher, but with the choppiness that we saw last week, it would not surprise me at all to see this pair grind higher, not necessarily flow higher.
Quite frankly, that’s pretty typical for this market, and as a result I find this market to be one that’s better off to be played with the bigger picture in mind. The Canadian dollar has been fairly weak for some time now, and I don’t know that’s going to change anytime soon. I think that the 1.12 level above will offer resistance again, but at the end of the day it will eventually be broken to the upside.
Watch oil markets
Obviously, Canada exports a lot of oil to the United States. While it doesn’t necessarily have to be this way, quite often this pair will move in the exact inverse of the light sweet crude markets. However, lately we have seen little bit of a breakdown of that common correlation, and as a result it is just a tertiary indicator at best currently.
I think that this market has already decided that it wants to go higher, it’s just a matter of getting that impulsive move. This pair tends to go sideways for long periods of time, followed by brief and violent moves in one direction or the other. That being the case, I have always found it easier to simply have a position on in this marketplace that might be a bit smaller, instead of trying to time every move. That allows me to have exposure to what I believe will be the next move, but not such a large exposure that I have to worry about it, and that is why I tend to play smaller sized positions in this market. Having said that, I do believe that we are going higher.
