The USD/CAD pair initially fell during the session on Monday, but as you can see we ended up bouncing enough to form a hammer based upon the 1.0850 level. This is an area that has been rather supportive recently, not to mention the fact that we had formed a fairly supportive looking candle last week. On top of that, it’s interesting that the oil markets broke out a little bit during the session while the Canadian dollar stayed soft. That tells me a lot, and as a result I feel that the market may be running into serious support down here, and that perhaps the market has fallen about as far as it wants to.
If we get a move higher, I believe that a break above the 1.09 level will lead to the 1.10 level, and possibly even the 1.1060 handle. A move above the 1.1060 handle would be reason enough to start going long, and aiming for the 1.12 handle given enough time. On the other hand, I don’t really see an argument for selling unless of course we break down below the recent lows, which is essentially the 1.08 handle.
Major support below
There is a major support below current pricing, not to mention the fact that there is significant support down at the 1.06 handle. I do not believe that this market can break down below the 1.06 handle, and I recognize that there is a significant amount of support at the 1.07 handle. That is the beginning of a support “zone”, and looking at this chart, I believe that ultimately we will continue the uptrend. After all, the Canadians are nowhere near tightening their monetary policy while the Federal Reserve already has started to. That should be supportive for the US dollar, and ultimately should flow money into that currency.
In fact, I believe that the US dollar will more than likely be one of the better performing currencies are the next year as we are starting to see the inklings of a potential tightening cycle out of the United States.
