The USD/CAD pair attempted to rally on Tuesday, but in the end failed. In fact, it formed a shooting star at the end of the day, and this could be a signal that further weakness is coming. The pair is well bid below though, so any attempt to sell this pair should be a short-term trade only, and with the understanding that it would only take one wrong headline to force the trader out.
The oil markets look as if they are trying to find a base at these levels, and the fact that the commodity is finding such support could suggest that this pair will find it hard to continue higher in the meantime. However, the fact is that the oil markets are in trouble, and as long as that is true, it is going to be difficult to sell this pair for any real length of time.
In fact, this is exactly what we see: A chance to sell – but only for a very short-term trade. The shooting star does suggest further weakness, but you can see on the chart that the 1.02 area could come into play as support. With this in mind, we can either short this pair for a quick trade, or wait until that level is hit to see if buyers step into the market to get us long.
Below there are even more important support levels such as the parity and 1.01 marks. Because of all of this, and the global headlines being so negative on the whole – we only like buying this pair at the moment as the US dollar is king around the world. The Canadians will more than likely suffer because of the lack of global trade, and the oil markets could also drag the Canadian economy down as well.
The pair won’t be sold by us until we close on a daily chart below the parity level, which of course would show real momentum by the bears. As for buying – the above mentioned scenario has us doing that, or even a break of the recent highs.
Written by FX Empire