The USD/CAD pair initially went higher during the course of the session on Thursday, and even broke above the 1.25 handle at one point during the day. However, we turned back around to form a shooting star and this of course is a very bearish sign. Is because of this that we start to become concerned for the uptrend, but also recognize that it is a little bit overextended at this point. This is also the beginning of a massively consolidative area from the past, which of course should end up being resistive. Reacting to the 1.25 level in a negative manner isn’t necessarily something that surprises us, and we recognize that it could offer a nice pullback. Will we will become truly interested in is if we can buy down at the 1.23 level on support. On the other hand, if we break above the top of the shooting star, that’s very bullish as well.
Simultaneously, you have to keep in mind that both the US and the Canadian GDP numbers come out today, and that of course will have a great influence on this market. We also have oil markets that are testing significant support, so if a breakdown this should be good for the US dollar and vice versa. On the other hand, if oil find quite a bit of buying pressure that should send this market much lower. There is a lot of volatility about to happen regardless of what comes about, and therefore you should be very careful.
If we can break above the top of the shooting star and above the 1.25 level, that would be an extraordinarily bullish sign, and at that point in time we would be aiming for the 1.28 level given enough time. If we pullback from here we would anticipate the 1.23 level to be supportive based upon the fact that it was previously resistive back during the month of April. If we break down below there, then the downtrend continues and we head back towards the 1.19 handle. At this moment in time though, we have not given up on the US dollar.