The USD/CAD pair originally rose during the session on Monday, but found the 1.01 level to be far too resistant yet again. This market had previously seen quite a bit of resistance at the 1.0050 level, and as a result we should begin to see support at this area.
The move that we have seen recently has been parabolic, and it also flies in the face of the bullishness of crude oil currently. Normally, higher oil prices will drive the value the Canadian dollar higher, which consequently drives the value of this pair down. However, we are not seen that recently and this of course suggests something isn’t quite right.
Looking at this chart, the 1.0050 level should offer enough support see this market try to make a move towards 1.04 before too awfully long. With this being the case, we are more than willing to start buying supportive candles at the present area, and also shortly below. If we get that pullback, we expect to see buyers stepped in this marketplace and push the value of the dollar higher.
The Bank of Canada has recently stated that the need to raise interest rates may have subsided a bit, and that the timing of those rate hikes will certainly be pushed back. This of course works against the value of the Canadian dollar, and as a result it is one of the more poor performers over the last seven days or so. Because of this, we feel that we are at an inflection point now. We begin to ask questions of the Canadian dollar, and whether or not it really should continue to gain value.
If we get supportive action right around this area, we are more than willing to start buying this pair as we believe the area should serve as a launching pad higher. The risk reward ratio certainly is there, and as a result we would not be afraid to take this trade. Alternately though, if we managed to break back down below parity, we believe that the sellers will have regained control of the pair and that we should continue much lower. In the meantime, expect choppy conditions going forward.
Written by FX Empire