The USD/CAD pair fell during the course of the week, and in fact close that the very bottom of the range. This of course is a very negative sign, and with that it appears this market is really struggling to find buyers. It does make sense, as the oil markets look rather well supported, and of course the Canadian dollar is highly leveraged to whether the oil markets do well or poor. As Canada exports so much oil to the United States, it also makes sense that flow of money across the border will highly influence with this market does.
However, one of the things that do not paid attention to is that the United States is producing more and more oil these days. Because of that, the correlation isn’t quite as strong as it once was, and with that we have seen the oil and the Canadian dollar markets diverge from time to time. Because of this, what we are about to write could actually be possible.
If we get a supportive candle below, we would be interested in going long, as the trend line that appears on the chart is rather significant. On top of that, the 1.06 level is rather supportive from a horizontal standpoint as well. We can also see the oil markets continue to go higher at the same time that the US dollar does. This is a bit counterintuitive, but support is support, and has to be respected if it comes back into play.
We find supportive action in this area, we could very easily see this market go back to the 1.10 level, where there is a significant amount of resistance. A break above there of course since the market much higher, and it’s very possible that the market could it grind its way higher from there. On the other hand, if we do break down below the 1.06 level, we feel that this market is probably heading back down towards parity. With this, we will be very interested in what happens with the weekly candle this week.
