The USD/CAD pair fell during most of the session on Friday, but as you can see found enough support just at the 1.09 level to bounce and form a nice-looking hammer. This hammer is shaped perfectly, and sits just below the vital 1.10 level. The thing that I find most interesting about the hammer is the fact that we do have a significant amount of support all the way down to the 1.0850 level, and it is at the top of what I would consider a zone of buying. Because of this, on a break above the 1.10 level, I feel that this market will indeed to start to go higher again. After all, we had a nice uptrend going until the last two weeks. With that, I feel that this is simply been a pullback in an otherwise decent uptrend.
Because of this, I believe that the market will indeed it try to target the 1.12 level again, as that was the most recent high. If we can get above that level, I think that we will go to the 1.15 handle over the course of the next couple of months.
Remember, this pair doesn’t always produce fireworks.
The reason I said that I think it might take a couple of months to get to the 1.15 level is that this pair has a long history of grinding sideways, and then suddenly moving in one direction or the other. It’s a very impulsive pair, and that is mainly because the two economies are so interconnected. It’s a lot like the EUR/GBP pair, a measure of two highly illiquid trading partners, and therefore one side of the equations economic issues greatly influence the other. It almost creates a status quo of sorts as the market will have to be balanced from time to time.
Nonetheless, I still believe that the Federal Reserve looking to continue tapering off of quantitative easing will pressure value of the US dollar higher in general, and although we may not see massive moves higher, this pair should continue to grind to the upside.
