The USD/CAD pair went higher during the course of the day, showing real strength during Friday’s session. It appears that we are now broken out, and now that we have cleared the 1.10 level rather significantly, we feel that this market will then go to the 1.12 level given enough time. We think pullbacks will continue to be buying opportunities as the Canadian dollar is not getting help from the petroleum markets. With that being the case, the market should be one that is one that is a “buy on the pullbacks” type of situation in the most classic sense.
The 1.10 level should now offer plenty of support though, as it was previous resistance. Keep in mind that we have broken above to shooting stars as well, so that is also a very bullish sign. The weekly candle looks very strong, and quite frankly it would not surprise us at all if we go above the 1.1250 handle, which was the previous high. If we do that, we feel that the market then goes to the 1.15 handle, given enough time.
Even if we broke down below the 1.10 level, it’s very likely that we have support all the way down to the uptrend line that’s on the chart. Above there, there is also the 1.0850 level as well, which should be every bit as supportive. With that in mind, and the fact that the US dollar continues to strengthen against almost anything in the marketplace right now, it makes sense that the Canadian dollar continues to weaken. The market could be entering a longer-term cyclical uptrend, and if that’s the case we should simply see this market go much higher, as it has in the past. After all, this market has a long history of grinding sideways, and then moving and possibly in one direction or the other. There is no reason whatsoever to think that it’s going to change now, so therefore we are extraordinarily bullish of this market as we have been in the past. However, keep in mind that there is a lot of volatility in this pair, so being patient is probably the way we have to go.
