The USD/CAD pair fell during the course of the session on Friday, but found enough support below to turn things back around and form a hammer. The hammer of course is one of the strongest candles at you can get in the Forex world, so I think that it is only a matter of time before we break out to the upside. Quite frankly, I have known that the 1.28 level below is the bottom of the supportive range, with the 1.30 level being the top of it. Having said that, if we can break above the 1.30 level, this market should bounce significantly and reach towards the 1.34 handle. With that being said, I am a buyer above that level but I recognize that we need to make that move first in order to even consider risking money in this market.
Oversold
Another reason that I think we could bounce from here is that we are simply oversold. This is a market that has fallen apart recently, so with a little bit of luck and support, this market could bounce significantly. If we did break down below the bottom is hammer, although it is a very negative sign I would not be a seller quite yet. I need to get this market below the 1.28 handle in order to start selling at this point in time, but if we get below there I feel that this market would come undone as that would be a major breach of support.
The shape of this candle is of course very good, so having said that I do have high hopes but I also should mention that the oil markets have formed a shooting star for the session on Friday as well, so as the oil markets drop we could see this market bounce in reaction. The correlation of course has been long-running, so I don’t see why that would change anytime soon. I’m looking for a buying opportunity, just don’t have one quite yet.
