The USD/CAD pair rose for much of the session as the “risk off” attitude continues to plague the markets in general. Adding to the bullish pressure is the fact that the oil markets fell, and this in turn hurt the Loonie. The end of the day saw a sell off though, and the candle for the session is a shooting star now.
The candle itself looks like a good sell signal as it is at the 1.03 area, a level that we thought could be resistive. However, as the pair has broken out so strongly, we think this is only a signal that a pullback is coming, not a trend reversal. The parity level below looks like it is going to be very supportive, and the support actually starts at the 1.01 level – making it a 100 pip thick zone.
The pair looks like a good candidate for one that will move much higher to the upside over time, but the pullback will be a chance for those of you that aren’t in the pair to get involved. As long as the parity level holds, there is no reason to think that this pair should be sold. When you look at the move recently, there is a real extended bullish run – always an invite for a pullback as the inertia runs out.
The Canadian economy is doing fairly well, and there is a chance of a rate hike out of that country in the near future. However, as the world is so risk adverse at the moment, there is a serious possibility that traders won’t even care about that part of the equation. With the action that we have seen lately, this pair could be volatile as it is a commodity driven pair, and the oil markets have been wild to say the least.
The buying of this pair on pullbacks is going to be our strategy going forward. We aren’t selling until we get a daily close sub-parity, and would also buy on a break of the top of the shooting star from the Wednesday session.
Written by FX Empire