The USD/CAD pair did very little during the session on Monday, which of course would have been expected as it was the US holiday celebrating Martin Luther King Jr.’s birthday. Because of this, the largest percentage of traders that trade this particular market would have been away from their desks. Within this chart though, you can see that we are approaching a significant amount of resistance and the next couple of trading days should be very interesting indeed. We think that the 0.9975 level should offer significant resistance going forward and a pullback would not be totally out of the question.
Leo’s chart, we have been in a downtrend for a significant amount of time. The overall trend is most certainly bears, but over the last couple of months we have simply seen more consolidation in this pair. This makes sense of course as there have been several fiscal fights in the United States, and the Canadian economy is highly leveraged to America. Because of this, traders simply have no idea what to do with this currency pair.
Ironically, we’ve seen strength in the oil markets over the last couple of sessions while the Canadian dollar has sold off. This is the inverse of what normally happens in the situation, and as such it makes us very leery to buy this pair because of it. Add to that the fact that there is resistance above and the 0.9975 and parity levels and we have a situation that we may not want to be involved in.
We still prefer to sell this market, especially considering that the oil markets are breaking out to the upside. The real question will be whether or not it is a “risk on” type of scenario around the world, or a “risk off” one. If this market behaves as it normally does, it needs to see a “risk on” environment in order to start selling off again. It’s certainly with the overall trend, which of course gives us more comfort selling. As far as buying is concerned, we really don’t see a serious break out into we get above the 1.0050 level. At that point, we would have to recognize the fact that the overall momentum is definitely shifting.
Written by FX Empire