The USD/CAD pair exploded to the upside on Wednesday, breaking above the 1.10 level for the second day in a row, only this time we managed to stay above it and more importantly broke the top of the shooting star that had formed for Tuesday. This shooting star being broken to the upside is without a doubt a very strong sign for the US dollar as a Canadian dollar continues to get punished.
What’s interesting about this move is that it contradicts what we saw in the oil markets during the session on Wednesday, as the light sweet crude markets had a very strong showing. Typically, if the oil markets do well, so does the Canadian dollar, especially against the US dollar. It’s interesting that we have seen exact opposite during the session, and as a result we believe that the Canadian dollar must be in significant trouble at this point.
Fact that we have broken above the top of the shooting star shows that the resistance that has been so important for this market over the longer term has given way, and we have to keep in mind that the 1.10 level was resistive looking on the longer-term charts as well. Because of this, we feel that this market has entered a leg higher, and that this market should go all the way to 1.15, given enough time. Granted, short-term pullbacks will more than likely be opportunities to buy, and that’s exactly how most traders will use them.
The 1.10 level should hold as support now, and if it continues to do so, we think that this market should be strong, and possibly like it tends to be, quite parabolic. After all, this pair tends to go sideways for long periods of time before shooting in one direction or the other with significant strength. Anyway, we see this is a bullish market, and will use any type of pullback as a buying opportunity for the next 500 pips or so. Selling isn’t even a thought until we get well below the 1.09 level, possibly even lower than that.
