The USD/CAD pair fell hard during the session on Friday, breaking below the 1.08 level. This was an area that I thought was going to hold as support, and since we are broken down below it, I believe that this is a fairly significant signal at this point. However, I should point out that there is an uptrend line below, somewhere near the 1.06 handle. It is because of this, I think that the significant break down is probably more of the short-term variety, and it’s not until we break down below the 1.06 level on a daily candle that I feel that the trend has reversed to the downside yet again.
Ultimately, I think that if you are quick enough, you can short this market now, but turned back around and start buying somewhere closer to that massive support if we get the right candle. It’s hard to tell what will happen obviously, but I do recognize that there is a significant amount of support in that general vicinity, thereby making any selling opportunities now ones that you need to take quickly and get out of.
Watch the oil markets, they could lead to a higher Canadian dollar after all.
Once the oil markets, because they do look rather healthy right now. Generally, this means that the Canadian dollar should continue higher, as the Canadians export so much crude oil. A lot of Forex traders will use the Canadian dollar as a proxy for oil markets, and that is the one thing that really could break this market down below the 1.06 handle. However, there has been a bit of disparity in the normal correlation between the 2 markets. With that being the case, you have to keep an open mind but be aware the fact that the old correlation could come back in full force.
Ultimately though, this is a market that tends to chop around sideways for long periods of time, and then suddenly move in one direction or the other for massive gains or losses. That’s probably what we’re going to see again, but in the meantime I think that the next 150 pips or so is to the downside.