The USD/CAD pair broke higher during the course of the session on Wednesday, clearing the 1.30 level again. With this, we believe that short-term pullbacks will continue to offer buying opportunities, but we do anticipate that we should see quite a bit of volatility in this area as it is a massively resistive barrier due to the reaction that we saw to this level during the financial crisis. With that, we believe that pullbacks are simply opportunities to start going long and a short-term chart again. We believe that traders are trying to build up enough momentum to go higher, and that they will eventually be rewarded.
We believe that the 1.28 level below is massively supportive, and as a result we feel that the market will find plenty of buyers below. Because of that, it is likely that a pullback should attract enough attention to get the buyers involved. The supportive looking candles between here and the 1.28 handle is of course the catalyst that we will use in order to start buying on pullbacks, as that should represent “value” in the US dollar.
The oil markets broke down below the $50 level during the session, and this of course is very negative for the Canadian dollar as it is so highly tied to the crude oil markets in general. With this, it looks as if this is finally going to be a market that could break free, and if it does we could be looking at a massive move higher over the longer term. In fact, this could very easily end up being a “buy-and-hold” type of situation as well as a “buy on the dips” type of scenario.
It is not until we get below the 1.28 level that we would consider selling this pair, as oil markets would also have to move higher as it is such a highly important catalyst when it comes to the CAD. Ultimately, we think that the market is ready to break out, it’s just that since it is summertime trading that we are doing this in, it may take a few sessions.