The USD/CAD pair fell during the course of the day on Monday, showing the 1.18 level to be resistive as we had anticipated. This coincides with support being found have to $50 level in the light sweet crude market, so quite frankly this doesn’t surprise us that this market would pull back a little bit from here. On top of that, it is a massive resistance barrier, and as a result it doesn’t strike as is a bad idea for this market pulls back.
We believe that the 1.16 level below should be supportive, and as a result were waiting to see if there is some type of supportive candle in that area to start buying. Although judging by the way the market close, and the fact that we believe that this market will fall from here, the truth is that we are in a nice uptrend, and there’s no reason to fight that. After all, the US dollar is one of the strongest currencies in the world right now, and the Canadian dollar of course is too tied to the value of oil that it makes sense we would do exactly what we are seeing right now.
Looking at this chart, we believe that is simply an attempt to find buyers and build up enough momentum to finally break out above the 1.18 level. Above there, we feel that the market should then go to the 1.20 level given enough time. With that, the market should continue to be one that you can buy on dips, simply because the US dollar looks as if it is ready to continue higher in general. The Canadian dollar course is going to struggle based upon the fact that it will market simply cannot find footing at the moment.
Each pullback should be thought of as “value”, as it shows the US dollar being cheaper for the short-term. The market tends to grind quite a bit to the side and back, but ultimately will make very impulsive moves. We feel that a pullback to the 1.16 area or so it makes sense as we bang around in this general vicinity, ultimately to break out and head much higher.