The USD/CAD pair fell hard during the session on Tuesday, testing the support level below that is the absolute bottom of the consolidation area. While we anticipate that there should be buyers in this region, the fact is that we close towards the very lows of the range for the day. That is always a negative sign, thereby it we make a fresh, new low below the lows that we found in March, we would be sellers down to the 1.07 handle as that would begin the next support area that extends all the way down to the 1.06 handle
Because of this, we are starting to have to admit that perhaps the trend is starting to turn back towards the downside, but we do not have the correct sell signal yet. On the other hand, we don’t want to buy this pair based upon this support level solely, as it certainly looks like the market could break through a given enough pressure. With the oil markets been so unreliable, it’s not a big surprise of the Canadian dollar has gone back and forth and vacillated, but not necessarily incongruence with its normal correlation to oil.
If we were to rise from here, the 1.10 level would be significant resistance, heading to the 1.1060 handle, which at that point time we would finally be breaking out to the upside with something significantly. Above there, the market could go as high as 1.1250 without too much in the way of trouble, but we have to admit that this market is most certainly hanging by a thread at this point.
The real “floor” in this market is the 1.06 level, and as a result we are not able to sell for any great length of time until we break below there. If we broke below there, we would be looking for the parity level without too many issues as far as we can tell. This is the longer-term trend, so it wouldn’t necessarily be out of order as the market has acted over the last couple of years.
