The USD/CAD pair had an interesting session on Wednesday as the pair was at one time bullish, then bearish, and finished the day forming a shooting star. The shooting star for the session does in fact seem to suggest that we are going to fall again. The breaking of the bottom of this candle would be a valid sell signal, and the 1.00 level below looks to be supportive if we do in fact get it. However, there is something very odd about this pair at the moment.
The USD/CAD pair typically will move with the oil markets. However, during the Wednesday session we didn’t see this. In fact, the Light Sweet Crude markets fell hard while the Canadian dollar rose in value. Normally, this will reconcile itself over time, and now we have to ask which scenario the market will follow – a rising CAD, or a falling oil market? The truth is that the pair has to be traded in tandem with the oil markets in general, so if you are to take a position in this pair, you need to watch them both.
The shooting star for the session is certainly a bearish sign to say the least. From a purely technical point of view, this pair should fall on a break of the Wednesday session lows. The top of the shooting star is also a signal as well, as a break of the highs would show a serious sign of strength by the market. On this move, we would be willing to buy. And this is the “crux of the problem” for us. The market shouldn’t be falling – yet it is. The markets is never wrong they say, so we are watching this with great interest. Perhaps the oil markets will spike?
Because of this, we will keep our stops tight on either one of the signals mentioned previously. Sooner or later, you should see the oil market and this one “synch back up”, and this would be the true signal. Until then – we are very cautious but willing to trade.
Written by FX Empire