The USD/CAD pair rallied during the session on Friday, but as you can see gave back most of the gains in order to form a shooting star. The shooting star looks like it is in reaction to the 1.12 level, an area that I had anticipated been resistive again. On top of that, the market has probably gained too much far too quickly, and a pullback from here makes sense. However, I still believe in the upturn that we’ve seen over the last several months, and believe that this pair will in fact go much higher. What I find interesting is the fact that the oil markets have shown extreme strength while the Canadian dollar simply hasn’t.
With that, I believe that the US dollar will continue to do better than the Canadian dollar, because the oil prices are probably going to be based more on demand than anything else. Sometimes, oil markets rise in reaction to a weakening US dollar, but that’s not something we are seeing at the moment. Because of this, the correlation that a lot of you are looking for simply isn’t there.
1.10 – or so.
The 1.10 level should continue to be supportive, but I recognize that the support level is more of a “zone” than anything else. Because of this, I would not be buying directly at 1.10, but rather waiting for some type of supportive candle which is something that should be done anyways. That being the case, I am a buyer, but not at this level. The one caveat of course would be as we managed to break above the top of the shooting star from the Friday session. A break above there would of course be massively bullish, and should send this market looking to the 1.15 level.
Even if we fell below the recent low from Wednesday, I still think there’s plenty of support all the way down to the 1.06 level, and as far as I’m concerned any supportive candle between here and there is a potential buying opportunity. However, I would be a bit surprised if the closest support level mentioned above actually fails. Because of that, I am “buy only.”
