The USD/CAD pair broke much higher during the course of the session on Friday as the 1.25 level offered quite a bit of support. Not only did the support come into play, the market broke above the top of the hammer from the Thursday session, a classic buying signal when it comes to the art of technical analysis. Ultimately, we believe that this market should then go to the 1.28 level, an area that has been rather resistive in the past. If we break above there, we feel that the market should then head to the 1.30 level. Any pullback should be thought of as value in the US dollar which of course is one of the most favored currencies in the world at the moment, and as a result it makes perfect sense that the Canadian dollar would suffer against it.
Oil markets certainly don’t look exactly strong at the moment either, so that of course will move against the value of the Canadian dollar also. Looking at this chart, we are most certainly in an uptrend, so this is just continuation of what we have seen for some time. Over the last several weeks, we have seen quite a bit of consolidation, which is quite often what the market does after a significant move. It is simply building up enough momentum to break out in my opinion now, and the 1.30 level dollar above is of the gateway to much higher prices.
If we can get above the 1.30 level, this would in fact be a very bullish sign as it was where the pair stopped during the financial crisis. If we can finally break above there, this becomes a longer-term buy-and-hold type of scenario, and of course a buy on the dips type of scenario as well. Even if we pullback from here, we think that the market will find plenty of support at the 1.20 level as well, and with that we are bullish and have no interest in selling this pair at the moment because of the strong momentum on the longer-term charts.