The USD/CAD pair initially tried to rally during the course of the day on Monday, but ran into far too much resistance at the 1.28 handle. By doing so, we pulled back to form a shooting star which of course is a pretty negative sign. With fact, I believe that the market is trying to tell us that it needs to roll over a little bit. The shape of the candle is at 100% perfect, but the fact is that we continue to fail at the same level again and again. With this, I feel that we could get the pullback that could be necessary in order to build up enough momentum to break out finally.
Ultimately, I do believe that we break out but I recognize that we could be heading towards the 1.25 level, which is a large, round, psychologically significant number. That might be exactly what we need in order to pushes market much higher. With that, a supportive candle at a lower level of course makes a nice buying opportunity as I believe that the US dollar is still going to be favored at the moment.
Oil markets
Oil markets are certainly not helping the situation, as the Canadian dollar is so sensitive to the oil markets in general. They are currently pressing against pretty supportive levels, so a bounce in the oil markets wouldn’t be a huge surprise, which of course should push this market lower, as the US dollar tends to move inversely to oil markets, especially when measured in Canadian dollars.
However, we could break down below the $50 level in the WTI Crude Oil market, and that should send this pair busting through the 1.28 handle given enough time. Once we get through there, I feel that this market probably heads towards the 1.30 handle over the course of several weeks. However, consolidating after a massive of move like we have had recently makes perfect sense, so I think that so far the trend looks very much intact, just a little tired.
