USD/CAD fell on Tuesday as the oil markets rallied hard. The pair managed to break below the 1.03 level for a sustained period of time during the session, but bounced back above it by the close. The level looks as if it is trying to be supportive for the market, and the move is probably somewhat overdone as the Light Sweet Crude market rose over $3 for the session. With this in mind, we are willing to buy on supportive action, but are aware of the light volume and ferocity of the Tuesday move. The parity level below is the next massive support area, extending all the way down to the 0.99 mark. The economic situation didn’t exactly change overnight, so this move is probably a bit suspect at this point.
The oil markets are getting a boost by fear mongering about the Iranian tensions and the North Korean succession questions. To be honest, this is more likely to be market noise once it is all said and done. The Canadian dollar will certainly get sold off once calm returns to the oil markets as the recent drama turns out to be just that – drama.
The breaking below the 0.99 level has us changing our minds, and the area all the way down to that mark 400 pips below will certainly have plenty of supportive positions. With this in mind, our proclivity is to buy on dips, and on supportive candles. We like the fact that 1.03 has held, and now would look for short-term hammers and the like to buy from. The market looks bullish still, despite the impressive moves in crude. In fact, the USD/CAD pair didn’t move nearly as much as you would expect on a day that oil markets skyrocketed, which could be a tell in and of itself.
The breaking of 1.04 has us thinking that we are heading to 1.05, 1.07, and then onto 1.10 eventually. We are still bullish on this pair, and one day doesn’t change this conclusion. The pair will continue to be bought on the dips by us.
Written by FX Empire