The USD/CAD pair initially rose during the session on Wednesday, almost touching the 1.10 level. As you can tell, the market did pull back from that area though, and we did in fact end up forming a shooting star, one of the most bearish candlesticks out there. However, we have to ask yourselves whether or not this market looks likely a pullback with any type of significance. At this point in time, it does not appear that way and we believe that more than likely the market will simply pull back to find support. That support will more than likely be seen at the 1.09 level first, and then possibly lower at the 1.0750 level.
This market has been very parabolic lately, but we did have a little bit of a hiccup a couple of sessions ago. This is completely normal for this particular market, so it does not concern us that the market has risen so quickly. Quite frankly, we believe that any pullback will be looked at as a buying opportunity by those who have missed out on the trade, as it typically is. On the other hand, we could possibly break above the top of the shooting star, and a daily closing that clears the 1.10 handle is enough for us to start buying this market again.
Keep in mind that the oil markets look suspicious as well, like perhaps that they could start to fall apart again, even though we got a little bit of a bounce for the session on Wednesday. Because of that, it would make complete sense to see this pair break above the 1.10 level at the same time that the crude oil markets fall apart. After all, the oil markets have a large effect on the Canadian dollar typically, and we don’t think that’s going to change anytime soon. Nonetheless, we are going to look for supportive candle wars that breakout in order to take advantage of what seems to be a trend that once to continue a bit longer. Selling therefore is not possible.
Written by FX Empire