USD/CAD fell during the Tuesday session as the “risk on” trade had a little bit of help for the day. The 1.01 level below still looks very supportive at the moment, and as a result we are more interested in the area than what is going on at the moment in this pair. We have seen various attempts to break down through it, and so far it has held. Also, the support area seems to go all the way down to the 0.99 level, and as a result we think it is pretty solid.
However, the highs have been falling as well, and it almost looks like we are trying to form a descending triangle. This of course is a bearish sign, and if that is the case, we would become bearish as well. With that massive support zone mentioned above though – we would let the triangle get our attention, but wait until we close below the 0.99 level on the daily chart in order to sell this pair as it could get fairly whippy below until we clear that mark.
The candle for the session did close at the bottom of the range, and this is a bearish sign. In most cases, this suggests that the move may continue going forward. However, with the massive support seen below, we do not wish to get caught selling at such low prices as it would simply be chasing the move, and could very well snap back in your face.
The daily close below 0.99 would more than likely be accompanied by the oil markets rising significantly, perhaps as a result of the Iranian threats to close the Strait of Hormuz actually being made true. The fact is that the move is highly unlikely, and because of that we are still expecting the 1.01 level to at least make a solid attempt at holding.
We like buying supportive candles near that area, especially on the daily time frame. The move could come rather rapidly as well – as the good news could suddenly send oil prices much lower. The idea that the Dollar should be sold isn’t one we like in general, so while we are not anxious to be involved in this pair because of the issues in the oil markets – we would rather not sell the USD either.
Written by FX Empire