The USD/CAD pair initially fell during the course the day on Monday, but found enough support to turn things back around and break through the 1.30 level during the day. This of course is a very bullish sign, as the market has recently tested will we considered to be the massive “support zone” that extended all the way down to the 1.28 level. We have in fact bounced from down there, and it looks as if we are picking up momentum. We believe that this market will eventually go higher, but it is going to be fairly choppy on the way up. You have to be able to deal with quite a bit of volatility in order to take advantage of what seems to be a continuation of the longer-term trend. The question then remains whether or not we can go all the way back towards the 1.35 handle. This is a market that certainly has fallen quite significantly recently, and that of course means that it is oversold at this point.
The market recently broke above the 1.30 level, and then extended higher only to turn things back around and break down below it. Because of this, the market looks as if it is trying to continue what we have seen recently, but it certainly has struggled with oil prices doing better as of late. With that being the case, the market will grind its way higher in our opinion, but you are going to have to deal with pullbacks from time to time. Because of this, we should continue to go higher but only on short-term trades at this point in time.
The 1.28 level below is essentially the “trapdoor” of the uptrend, and if we can break down below there the market should then go towards the 1.25 level, and perhaps even much lower than that. We have no interest whatsoever in selling until we get below there, or get some type of massive rally that show signs of failure. The one thing you can count on at this point in time will be volatility though.