The USD/CAD pair had a bullish session for Tuesday as the bounce recaptured much of what was lost on Monday. The oil markets fell again, and this certainly helped the rise in this pair. The Dollar is currently being bought against most other currencies, and the Loonie is going to be no different.
Commodities are weak, and as Canada is essentially a commodity play with both oil and gold being major exports, it makes sense that the Canadian dollar would fall in value as demand for their goods will fall in a weak global economy. The move above the 1.01 level was a breakout in our opinion, and as a result we aren’t selling at these levels, no matter what candle formation appears.
The recent run up has been strong, and there are certainly going to be resistance areas above. This pair can often be choppy, so a smooth move higher may not be the case in the future. However, the fact that we managed to clear the top of the massive resistance area between parity and 1.01, we have no choice but to look at this pair as bullish for the time being.
The $92 level gave way in the Light Sweet Crude markets, and this suggests that we will see lower prices in that market. If that is the case, it will weigh upon the Canadian dollar in general. Also, a slowdown in global demand could be coming as the world’s economies slow down. In this very uncertain environment, people will sell risk assets first, and ask questions later. With this in mind, the Loonie may be getting a bit unfairly punished, but the psychology of the market has us thinking like that at the moment, and the only thing that truly matters is price.
The 1.04 level above looks very resistive, and any furthering of the move higher will have to break that level. It is with that in mind that we are watching that area if we go higher. As long as we are above the parity level, we will only buy supportive candles. A daily close below parity gets us selling again.
Written by FX Empire